The Digital Transformation of Labor

Automation, the Gig Economy and Welfare

Anthony Larsson, Robin Teigland, Anthony Larsson, Robin Teigland

• Publisher: Routledge
• Year: 2019
• eBook ISBN: 9781000731088
• Edition: 1
• Topic: Economics
• Subtopic: Operations
• Index: Economics

Through a series of studies, the overarching aim of this book is to investigate if and how the digitalization/digital transformation process causes (or may cause) the autonomy of various labor functions, and its impact in creating (or stymieing) various job opportunities on the labor market. This book also seeks to illuminate what actors/groups are mostly benefited by the digitalization/digital transformation and which actors/groups that are put at risk by it.

This book takes its point of departure from a 2016 OECD report that contends that the impact digitalization has on the future of labor is ambiguous, as on the one hand it is suggested that technological change is labor-saving, but on the other hand, it is suggested that digital technologies have not created new jobs on a scale that it replaces old jobs. Another 2018 OECD report indicated that digitalization and automation as such does not pose a real risk of destroying any significant number of jobs for the foreseeable future, although tasks would by and large change significantly. This would affects welfare, as most of its revenue stems from taxation, and particularly so from the taxation on labor (directly or indirectly). For this reason, this book will set out to explore how the future technological and societal advancements impact labor conditions.

The book seeks to provide an innovative, enriching and controversial take on how various aspects of the labor market can be (and are) affected the ongoing digitalization trend in a way that is not covered by extant literature. As such, this book intends to cater to a wider readership, from a general audience and students, to specialized professionals and academics wanting to gain a deeper understanding of the possible future developments of the labor market in light of an accelerating digitalization/digital transformation of society at large.

1 A journey of a thousand miles

An introduction to the digitalization of labor

Anthony Larsson

1. Introduction

It is held that the ancient Chinese philosopher Lao Tzu (604–531 BC) once said “a journey of a thousand miles begins with a single step” (Keyes, 2006, p. 107). In the same way, mankind has always looked for practical solutions to various problems throughout history, one step at a time, eventually advancing far beyond his original intention.

The extensive technological developments throughout the twentieth century have set the tone for how the future labor market of the twenty-first century has developed and will continue to develop. For instance, the Third Agricultural Revolution would increase agricultural production worldwide, and especially so in the developing world. During this period, many new technologies and techniques would develop, such as chemical fertilizers and agro-chemicals, along with controlled water-supply/irrigation and new methods of cultivation, including mechanization (Farmer, 1986; Esteva, 1996). This was followed by the scientific-technical revolution (circa 1940–1970) (Šmihula, 2010). This was subsequently followed by the digital/information and telecommunications revolution, also known as the “Third Industrial Revolution” (circa 1975–2010) (Esteva, 1996; Kheinman, 1978; Melnikov and Semenyuk, 2014; Vickery, 1999). These eras brought not only technological advancements that sought to improve people’s everyday lives, but they would also fundamentally change the economics of society and the way in which the labor market operated. For instance, bureaucracy began expanding and industries began developing information-generating activities, specifically the so-called “Research and Development” (R&D) functions (Veneris, 1990). Moreover, information has become a factor of production much in the same way as with the case of capital, labor, property, economics etc., while also becoming a “commodity”, i.e., a product/service that customers are willing to purchase on the open market. As information acquires a “use value” and “exchange value”, it also nets itself a price (Repo, 1986; Vargo, Maglio and Akaka, 2008; Eggert et al., 2018).

Progressing beyond the “Third Industrial Revolution”, is the “Information Age”, or the “Fourth Industrial Revolution”, also known as “Industry 4.0” (circa 2010s–present). Significant of this era are the emerging technology breakthroughs and developments in fields such as robotics, artificial intelligence (AI), nanotechnology, autonomous vehicles, biotechnology, Internet of Things (IoT), smartphones, Blockchain and 3D printing etc. (Walwei, 2016). The “Information Age” is intrinsically different from the technological eras, as the previous eras were mainly characterized by advancements in various types of technologies. As for the “Information Age”, its main advances lie not so much in the emerging of new technology per se, but rather in new means of communication and connectivity (Schwab, 2016; Schwab and Davis, 2018). Specifically, these new forms of communication technologies enable billions of more people worldwide to connect via the web, drastically improving the efficiency of business and organizations, while promoting better asset management by improved information access (Wisskirchen, 2017).

The definition of AI has many different variations. For instance, the Government of Canada (2019, para.28) defines AI as:

Information technology that performs tasks that would ordinarily require biological brainpower to accomplish, such as making sense of spoken language, learning behaviours, or solving problems.

The European Commission (2018, para.6), on the other hand, (having gone through some minor revisions in the past few years) has a somewhat lengthier definition:

Artificial intelligence (AI) refers to systems that display intelligent behaviour by analysing their environment and taking actions – with some degree of autonomy – to achieve specific goals.

AI-based systems can be purely software-based, acting in the virtual world (e.g. voice assistants, image analysis software, search engines, speech and face recognition systems) or AI can be embedded in hardware devices (e.g. advanced robots, autonomous cars, drones or Internet of Things applications).

Naturally, other variations may occur in different countries around the world. Interestingly, while the Canadian definition stresses the complexity of the system in assisting humans with chores, the European definition places more emphasis on the intelligent and autonomous design and behavior of the system. In this way, the European definition of AI accounts for the possibility of an evolution of the behavior of AI, in a way that follows technological advancement. That is to say, AI is not a “fixed construct”, and to that end, this definition better encompasses the relevance of AI in the scope of this book.

It is, in this context, appropriate to also mention the terms “digitization”, “digitalization” and “digital transformation”, as they have become frequently used “buzzwords” in many different businesses. However, the terminologies are sometimes erroneously used interchangeably. The first term, “digitization, entails the conversion of analogue material (such as images, video and/or text etc.) into a digital format (Larsson and Viitaoja, 2017; Feldman, 1997; Brynjolfsson and McAfee, 2014). The second term, “digitalization”, refers to a process wherein the use of digital/computer technology (also mobile applications) is adopted, alternatively, increased by an actor (Wachal, 1971; Castells, 2010). More often than not, the digital technology implemented with the intent of establishing a communication infrastructure that connects various activities of the actor’s various processes (Van Dijk, 2012; Larsson and Viitaoja, 2017). “Digital transformation”, on the other hand, is a considerably broader term that signifies customer-driven strategic business transformation requiring far-reaching and cross-cutting organizational change in addition to the implementation of digital technologies (Bloomberg, 2018; Cochoy et al., 2017). Due to its scope, digital transformation is in reality not a matter of implementing one project, but rather a whole series of different projects, effectively necessitating the organization to deal better with change overall. In this way, digital transformation in and by itself essentially makes organizational change a core competency inasmuch that the venture seeks to become customer-driven end-to-end (Bloomberg, 2018).

For this reason, “digitalization” and “digital transformation” are the two most useful/significant terms when explaining the changes and impact that digital technology has had on society at large. That is to say intelligent algorithms make our day-to-day tasks easier, and it is in many cases near impossible to imagine how we could manage without them. The use of AI and robotics continues to gain momentum at a rapid pace, which prompts the question as to what the future of labor will look like once fully evolved. Extant literature suggests that digitalization has opposing effects on labor markets and that as such, it is still not clear what effects a digitalized society will ultimately have on the labor market (Bührer and Hagist, 2017). Will mass unemployment, poverty and social distortions be a given consequence of this development or may there be a different outcome?

This book will seek to explore these issues and many more through a series of different studies by scientists and industry professionals from Europe and the United States, with deep insight into their respective areas. It is true that the chapters in this volume are to a large extent inherently based on a speculative and/or predictive premise, given the fact that much of the digital transformation is still happening and is nowhere near completed and/or optimized. However, while the authors have sought to interpret near- and far-future developments, they have availed themselves to uphold scientific rigor by following proper academic protocol. This means using citations and basing their point of departure in extant issues/problems and undertaking due analytical procedure and research rather than conveying conjecture or personal opinions. As such, the chapters offer an array of methodological and thematic studies, with some studies presenting original, empirical material while others are more theoretically rooted, with some additional chapters basing their foundation on various forms of literature reviews or departing from the authors’ personal, “best practice” experiences. To this end, the studies covered throughout the different chapters have based their assumptions in referenced facts, but while doing so, the studies may at times also transcend the conventional academic comfort zone by offering some foresight in how their subject area could transpire based on the current and expected developments due to digitalization and digital transformation.

The overall premise of this book takes its point of departure from a 2016 OECD report that targets the rapid structural transformations that have followed the digitalization process throughout the OECD countries (Berger and Frey, 2016). Specifically, this report lends support to the aforementioned academic notion that the impact digitalization has on the future of labor is ambiguous. That is to say that there is accumulating anecdotal evidence suggesting that the potential scope of automation has expanded beyond mere routine work, which would make technological change potentially increasingly labor-saving. On the other hand, there is evidence suggesting that digital technologies have not created new jobs on a scale that it replaces old ones.

Adding to this, an additional 2018 OECD report indicated that digitalization and automation as such does not pose a real risk of destroying any significant number of jobs for the foreseeable future (Nedelkoska and Quintini, 2018). Nevertheless, the report did contend that tasks by and large would change significantly, which in turn affects welfare, as most of its revenue stems from taxation, and particularly so from the taxation on labor (be it directly or indirectly). Taking its point of departure from the findings uncovered in these reports, the structure of this book seeks to explore some overarching themes in which digitalization and digital transformation can be expected to impact the labor conditions to some degree or another. The themes investigated are as follows:

1.1. Practical utilization of new technologies

These chapters discuss how the development of new technology can be applied in practice to enable people to work in ways they have not previously been able to.

1.2. The role of the digital welfare state

These chapters discuss how the transformation of labor markets affects the welfare state and the tax revenue system.

1.3. Digital disruption of status quo

These chapters discuss how digitalization and the digital transformation may be used by different groups or actors in ways to advance their positions on the labor market, or alternatively, how these developments may disrupt the status quo prompting these groups or actors to change their mode of operation in the future.

2. Chapter overviews

2.1. Practical utilization of new technologies

1. 2 Alexander Bard, Jan Söderqvist and Anthony Larsson – Behind the history of labor: technology as the driving force

This chapter explores the factor(s) that drive the organization of labor and how technology is used as a driving force, even in those instances where it may cause society to surrender its extant norms and routines. The chapter provides a narrative/philosophical discussion behind the historical development behind labor, while discussing the importance of communication and the exchange of information driving this development. The study postulates two research questions. RQ 1: Is there a new paradigm shift taking place in the future organization of labor? RQ 2: In the event that a new paradigm shift can be expected, is it compatible with contemporary social norms or can such a paradigm shift of labor organization be expected to also transform the essence of society itself?

1. 3 Jochem van der Zande, Karoline Teigland, Shahryar Siri and Robin Teigland – The substitution of labor: from technological feasibility to other factors inf luencing the potential of job automation

This chapter provides a comprehensive yet perspicuous introduction to the area by illustrating an overview of how digitalization and automation, along with the three underlying technologies of artificial intelligence, machine learning (a subcategory of AI), and robotics may be used in the future to perform wide varieties of routine and non-routine work tasks. The chapter seeks to understand to what extent these technologies and digital developments have the potential to replace human capabilities in the workplace. The chapter proceeds by discussing the factors that influence the pace and scope of job automation.

1. 4 Alex J. Wood, Mark Graham and Mohammad Amir Anwar – Minimum wages for online labor platforms? Regulating the global gig economy

This chapter investigates how the rise of the “gig economy” has served to enable internet users to find new job opportunities that have previously been unavailable to them. The authors describe the emergence of the phenomenon called “online labor platforms”, which effectively constitutes a global remote gig economy that provides clients to access world-wide labor power. The authors provide a detailed account of how these platforms work, while providing some original empirical research by interviewing 250 remote gig economy workers across ten countries and four continents along with platform CEOs and government and trade union officials. In addition, a survey encompassing 679 Asian and African workers has been conducted in addition to an analysis of transaction data and observation studies.

1. 5 Antoine Maire – The digital disruption of science: governments and scientists toward an “Ope...

Table of contents

• Cover
• Half Title
• Series
• Title
• Copyright
• Contents
• List of figures
• List of tables
• Contributors
• Foreword: galaxy incognito
• Letter from the editors/acknowledgements
• 1 A journey of a thousand miles: an introduction to the digitalization of labor
• Part I Practical utilization of new technologies
• Part II The role of the digital welfare state
• Part III Digital disruption of status quo
• Part IV Conclusion
• Index