Labour Markets Can Be Made Fit for the Future, if the Opportunities of Digitalisation Are Exploited in a Smart Way

The shocks created by digital change are likely to affect the labour markets. However, new technologies do not pose a threat to individual industries, jobs or social prosperity, and should rather be seen as an opportunity. There is, however, a trend towards polarisation: qualification and professional expertise are expected to increase in significance as a result of digitalisation, whereas the gap between wages is set to grow and forms of work are likely to undergo a considerable change, offering workers less social security in the future. These challenges can only be met through the combination of a forward-looking education and social policy, and an increased support of research and development activities in companies.

In other words, if digital change is addressed in an active way, this could help societies cope with problems arising from globalisation and demographic change. In their book “Digitaler Wohlstand für alle – Ein Update der Sozialen Marktwirtschaft ist möglich”, recently published by Campus Verlag, Professor Achim Wambach, president of the Centre for European Economic Research (ZEW) in Mannheim and head of the German Monopolies Commission, and Hans-Christian Müller, editor at Handelsblatt, argue that labour markets are facing fundamental structural changes – which, however, does not mean that societies will have to cope with mass unemployment in the upcoming years.

While new technological boosts are leading to the fact that many tasks performed by humans are becoming redundant, they also increase productivity. This does not only save resources that can then be invested, but also leads to the creation of innovations and new products, which in turn requires firms to hire more workers – welcome to the path to growth! The authors argue that new technologies also provide new jobs, creating more jobs than are lost. For the future, this will mean cooperation instead of competition with robots.

The government will have to pursue a policy of structural adjustment

As is the case with every advance, there will certainly be losers as well as winners in this process. One of the effects of digitalisation is that there is a greater demand for skilled professionals with high qualifications, who – as a consequence – also receive more pay than those with medium and low qualifications. While this puts more pressure on workers to compete in the labour market, it also brings about a change in the forms of work. Clickworkers and crowdworkers – or “the day labourers of the digital era,” as the authors call them – will complete small tasks and microtasks, which are allocated by companies via internet platforms. What is serious about this development is that this is likely to increase individuality in the digital working world, challenge the role of traditional employer-employee relationships and lead to the fact that jobs that are subject to social insurance contributions do not necessarily have to be the standard any more. The authors point out that the benefits of this change thus also come with drawbacks.

In order to address these issues, the government will have to take steps to mitigate these problems and exploit the developmental potential of digitalisation by pursuing a what is referred to as “structural adjustment policy” in the book. Apart from competition policy measures, impulses in social and education policy will also be essential to ensure a successful future of work. To this end, it will be necessary to eliminate minimum rates for self-employed individuals in health care and social security schemes. And although providing staff with further training in digital skills is primarily the responsibility of companies, it is necessary to also adopt an education initiative on government level. In their book, the authors also recommend allocating additional resources to initial vocational education and shifting one part of further training programmes to universities, vocational schools and university of applied sciences. Combined with tax credits for research-intensive companies, this would be an important contribution to ensuring the success of the future of work.