In recent years, digitization—the widespread use of interconnected digital services by consumers, businesses, and governments—has emerged as a significant economic engine that spurs expansion and makes it easier to create jobs. Digitization may be a significant tool for helping policymakers in the current setting of a slow global economy to promote economic development and jobs. As per Siddharth Mehta of Religare (former director) says “Digitalization is something that changes the society and surround the environment and now it will stay here forever, ow you have to adapt the changes it makes around you”.
The effects of digitalization vary by nation and industry, though. While developing nations tend to outpace developed economies in terms of employment creation by a comparable margin, developed economies benefit from economic expansion by a factor of roughly 25% more. The key factor separating the consequences of digitalization in established and emerging nations is their respective economic systems. Non-tradable sectors are crucial since developed nations mostly rely on local consumption.
“Digitization boosts productivity and has a discernible impact on GDP across developed economies. However, when lower-skill, lower-valued work is exported to emerging nations where labor is less expensive, the outcome might be job losses” stated by Siddharth Mehta, Religare, former director currently CIO and founder of Bay Capital. In contrast, developing markets are more focused on exports and are fueled by tradable industries. They often benefit more from the impact of digitalization on employment than it does on growth.
The effects of digitization vary depending on the level of development of an economy. It has a one-fourth bigger influence on economic growth in industrialized economies than in developing ones. However, compared to emerging nations, industrialized countries see less increase in employment.
Wage levels in the labor market might also be impacted by digitalization. Wages may rise as a result of increased productivity and aggregate demand as a result of technology adoption. The national, regional, sectoral, or occupational pay level may fall overall as a result of both increasing productivity and job losses. Which of the two approaches really takes place depends on the labor market and how productivity increases are allocated between capital and labor (supply of and demand for labor).
Digitalization has an impact on both the supply and demand for skills. For recently created occupations or activities, new abilities are required, but other talents will lose value when some jobs and tasks see a decline in demand.
The adoption of new technologies and the related job profiles for people affected by altered production/service supply processes are both predicted to contribute to positive employment growth as a result of digitization (for example, reshoring of activities previously offshored from Europe to locations with lower production costs).