January 19, 2016 -
The World Bank released a report last week that found that tech firms are making inequality worse.
While the report notes that growth, jobs, and services are the most important returns to digital investments and that digital technologies should ideally help businesses become more productive; the reports finds that better jobs have not been the result.
The World Bank study notes that the economics of the Internet favor natural monopolies, and that the absence of a competitive business environment can result in more concentrated markets, benefiting incumbent firms. Not surprisingly, the better educated, well connected, and more capable have received most of the benefits, circumscribing the gains from the digital revolution for those with lower incomes.
The report found that nearly 60 percent of the world’s people are still offline and can not fully participate in the digital economy. There also are persistent digital divides across gender, geography, age, and income dimensions within each country. Second, some of the perceived benefits of the Internet are being neutralized by new risks. Vested business interests, regulatory uncertainty, and limited contestation across digital platforms has lead to harmful concentration in many sectors.
In addition, quick expansion of automation, which has heavily impacted mid-level office jobs, have also contributed to a hollowing out of labor markets and to rising inequality.
In general, the report explores the impact of the Internet, mobile phones, and related technologies on economic development. The report found that the perceived benefits of digital technologies are often offset by emerging risks. As an example, many advanced economies face increasingly polarized labor markets and rising inequality, in part because technology augments higher skills while replacing routine jobs.
The report also found that many e-government initiatives have high levels of failure and that both governments and corporations are using digital technologies to control citizens, not to empower them.
In response, the report proposes policies to expand connectivity, accelerate complementary reforms in sectors beyond information and communication technology (ICT), and address global coordination problems.