Impact of Digitalisation on Economic Growth, Productivity and Employment

Abstract

Abstract Since the industrial revolution, technological innovations have enabled rise in productivity, employment, standard of living and the total population several times. In the last 15 years productivity growth has slowed-down in the most of large economies, probably due to slow diffusion of advanced IT solutions, but also due to inadequate statistical measurement of the value of IT services and slow progress in complementary and other technologies. The acceleration of productivity growth in the future is possible to foster through larger public investment in infrastructure and fundamental research, tax incentives and subsidies attached to innovations in the private sector, as well as through promotion of entrepreneurship and the reform of education system. The development and diffusion of digitalisation and other technologies is expected to trigger a slight acceleration in productivity, while explosive growth in productivity, as predicted by some theoreticians, is not likely to happen. The net effect of digitalisation on employment will be probably negative, but it is uncertain how much will be offset by a rise in availability of goods and services and creation of new types of goods and services. Employment will depend on the speed of adjustment of education system to technological changes and labour market requirements, as well as on the possibilities for vocational education and change in qualifications. An important reserve, which may reduce a drop in employment and enhance the welfare of citizens, lies in additional reduction of the working hours. In the long run, it is expected that the world population growth is to slowdown and then become negative, which will lead to a decrease in the labour force. In that case, full employment will be attained even with the decline in the number of jobs. In case of long-term massive unemployment, there is also an option for introduction of universal basic income or other type of social benefits, in order to prevent a significant rise in economic inequality.