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Digital transformation will impact on employment

The general consensus is that digital transformation will lead to job losses but whether this means a rise in unemployment depends on the number of new types of jobs that are created and the ability of people previously engaged in other occupations to fulfil them. These signals have come from executives, like Royal Bank of Scotland chief financial officer Ewen Stevenson. Recently Sweden’s Nordea Bank AB shed 4,000 full-time employees and 2,000 consultants as a result of digital transformation initiatives.

Telecoms and finance

Similar signals have also come from labor unions, such as the U.K. engineering union Prospect which is defending job losses at British Telecom which the union regards as being the direct result of digital transformation initiatives. Dutch bank ING has declared plans to reduce its workforce by around 5,800 workers, mostly in Belgium and the Netherlands, out of approximately 52,000. The cost savings will be directed into digital transformation projects.

With digital transformation, jobs will be impacted because a company digitally transforms and certain skills are no longer required. In another scenario, a company will close or downsizes because it did not successfully transform and cannot compete against digital businesses.

Rise of automation

With skill loses the biggest challenges to employment come from automation, in the form of robots, artificial intelligence, and through strategies like customer self-service. According to the World Economic Forum: “current trends could lead to a net employment impact of more than 5.1 million jobs lost to disruptive labor market changes over the period 2015–2020.”

The Forum takes the view that 7.1 million jobs will be lost as a direct result of many innovations, with the majority of positions “concentrated in the Office and Administrative job family.”

Fewer jobs over the next 25 years

In keeping with these industry signals, Gartner Inc senior vice president and analyst Dale Kutnick is of the view that automation will lead to massive job cuts. In the next 25 years, as he explained to a media briefing in Kuala Lumpur in May 2018, there are going to be much fewer jobs in the global market.

“Agriculture is already moving towards remote control vehicles, whether it’s for harvesting or planting. So it’s pretty autonomous, meaning fewer farmers will be needed”, Kutnick stated.

In terms of a solution, he says this is a problem for the state: “The question here is what are governments going to do with all this unemployment? That’s something they need to think about.”

What are the solutions?

Solutions that have been discussed include universal basic income and strategies around reskilling. With basic income, this is a type of program in which citizens of a country receive a regular sum of money from the government which is not means tested and which is sufficient to meet a person’s basic needs (at or above the poverty line). An experiment, based on the state paying an income has been run, with mixed results, in Finland.

The extent that new jobs will be created and the types of skills required remains somewhat fluid. This is partly because many businesses are not entirely sure what they will need going forwards. There are some who like at past technologies and previous statements about the creation of mass unemployment and state that the nightmare scenarios did not happen; this is countered by those who see digital transformation as a fourth industrial revolution, arguing that it differs to previous technological changes in terms the wholescale disruption to businesses.

In relation to skills, a recent survey by Fujitsu, called “Future Insights Global Digital Transformation Survey Report 2018”, indicates that a lack of appropriate skills is hampering the ambitions of many companies to complete their digital transformation initiatives.

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Written By

Dr. Tim Sandle is Digital Journal's Editor-at-Large for science news. Tim specializes in science, technology, environmental, business, and health journalism. He is additionally a practising microbiologist; and an author. He is also interested in history, politics and current affairs.

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