Inequality and the Digital Economy

Abstract

This chapter examines the impacts of the digital economy on employment, the drivers of change, and the options to alleviate the emerging problems. The digital economy was supposed to replace and enhance industrial jobs, but it has also accelerated the outmigration of blue-collar and service jobs, with only inadequate replacements. The impact on different income classes and generational levels has been unequal. Midpay jobs decreased while low- and high-skilled jobs rose. The chapter then discusses the economic fundamentals that shape the digital economy–highly concentrated, capital intensive, volatile, and unstable–and the consequences for digital firms and their management. They can expect new waves of political disputes, government policies, and labor unrest. Instead of claiming to be the solution and arguing that identifying a problem reflects an anti-technology Luddism, the sector would be wise to recommend, support, and finance public and private actions. Otherwise, the backlash will create forces that will restrict innovation.