Viewpoint: Covid, Digitization and Socioeconomic Inequality
02 MAY,2021 | MEDC
Covid has led to a huge rise in the digitization of the economy. That is because, after large external shocks to the system, firms restructure their businesses and adjust production towards technologies that lower labour costs. Firms may also prefer automation as it is immune from any health-related risks. Covid-induced uncertainty also adds to incentives for deploying artificial intelligence, as businesses try to ensure that they can withstand the next pandemic.
From a purely economic perspective, digitization is often beneficial to the economy, but it does not affect all workers equally. Low-skilled workers are more at risk of displacement by automation than high-skilled workers. This reinforces the existing dynamics of inequality, and does not bode well for sustainable economic growth. Left unchecked, growing disparities could lead to long-lasting grievances and form a vicious cycle, ultimately causing social unrest.
As digitization accelerates following Covid and transforms workplaces, more workers will need to find new jobs, especially those who are less-skilled and poorly connected. Policy to mitigate rising inequality includes revamping education and training programmes to meet the demand for more flexible skill-sets. Lifelong learning and new training – especially for the most affected workers – also needs to be a policy priority. The country’s education system needs to promote learning in all stages to life to address the challenges brought about by technological changes. It is also important to consider ways to address medium-term social challenges, including through strengthened social safety nets. The use of digital technology and e-commerce is here to stay, and those at the bottom of the pyramid need to have a working knowledge of it.
Equitable access to digital infrastructure is essential for promoting inclusive growth. In this regard, an effective digital ecosystem needs to be developed to support the creation, diffusion, and scaling up of technology and innovation. The private sector will drive most innovation. However, public policy will continue to play a pivotal role in forging critical links between institutions and technology firms. Covid has provided us an unexpected impetus in this direction, and we need to maximize it.
Digitization offers new ways to catalyse sustainable development strategies amid considerable development gaps. Fintech platforms can be used to increase savings and channelize resources into publicly or privately funded investments. Blockchain based solutions are promising ways to address financing gaps and secure sustainable funding for infrastructure development. Entrepreneurial initiatives to develop and implement new digital solutions should be supported by appropriate policies and regulations to develop viable business models reducing costs and meeting investment needs.
While digitization is inevitable, its distributional outcome depends largely on public policies. A society able and willing to provide support to those left behind in the relentless pursuit of scientific progress, will thrive. It will witness a faster and more sustainable pace of technological innovation leading to inclusive socioeconomic growth.