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Digital Transformation: Impact on Jobs – II

An aerial view of King’s Cross Tech Hub. Construction works have resumed after the pandemic but business remains slow as most people are tele-working from home and there is no guarantee that it will ever go back to the bustling place it used to be. Image credit: GEtty images

In the last century automation has resulted in a loss of jobs because machines could replace human workers. On the contrary, in most cases the Digital Transformation results in a loss of jobs because those jobs are no longer needed. There is not a machine (robot or software) that is replacing a human worker in performing an activity, rather, that activity vanishes.

Think about remote working. This keeps workers at home and the lunch break takes place locally. No more need to go to a Pret-a-Manger. The lock down has seen millions of workers working from home and restaurants around major business hubs in cities went into lock down as well. Once the lock down was removed most people continued to work from home. Facebook and Google offices in London King’s Cross, St. Pancras will remain closed till Spring 2021 and the many restaurants in that area, mostly catering for those employees are going bankrupt. This example shows how the DX in one area can impact, dramatically, another, removing the value it delivered.

One of the point made clear by the change in the way of performing activities during the lock down is that the supporting technologies (for remote working, transactions monitoring and authentication, digital signatures, cloud support) are available. However, the organisational processes where designed for a different way of working and they don’t fit well with the new one.

Several CEOs have realised that those processes have to be changed (and this is one of the major hurdles facing the transition). It happened in the 90ies –business process re-engineering– as result of the pervasive use of computers in the office. It is going to happen again as the value chains shift to the cyberspace and resources interact via the cyberspace.

According to a McKinsey study 60% of all occupations have at least a 30% of activities that can be shifted to the cyberspace or performed by machines. This, in other terms, means that 1.2 billion workers will be affected by the DX over this decade impacting on 14.6 trillion in wages. A good portion of wages will be shifted to investment in DX but that means that workers will lose that part of wages to the DX.

Whether these figures will turn out to be accurate or not is not really the point. They show a trend that is creating huge issues at societal level. Those Countries that, through policy and subsidy, will slow down the change can decrease the societal friction over the short term but may be facing even bigger challenges in the medium long term as their industry loses competitiveness.

It is not the point here to take a stand on one side over the other, just to set the stage. In Italy, as an example, the approach towards recovery from the economic downturn created by the pandemic is mostly focussing on subsides, including Government ban on lay-off. In the US the approach has been quite different letting private companies play with the rule of the business (with some forms of Government support to people losing their jobs).

Clearly, the goal should not be to preserve jobs that no longer create business value but to leverage on the resources that are becoming available (people looking for jobs) to create new business. Of course this is easier said than done.

About Roberto Saracco

Roberto Saracco fell in love with technology and its implications long time ago. His background is in math and computer science. Until April 2017 he led the EIT Digital Italian Node and then was head of the Industrial Doctoral School of EIT Digital up to September 2018. Previously, up to December 2011 he was the Director of the Telecom Italia Future Centre in Venice, looking at the interplay of technology evolution, economics and society. At the turn of the century he led a World Bank-Infodev project to stimulate entrepreneurship in Latin America. He is a senior member of IEEE where he leads the Industry Advisory Board within the Future Directions Committee and co-chairs the Digital Reality Initiative. He teaches a Master course on Technology Forecasting and Market impact at the University of Trento. He has published over 100 papers in journals and magazines and 14 books.