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Digital economy

Impact of digitalization on work in developing economies revealed by new ILO research

While many see technology as a key part of the solution to contemporary development challenges, new research points to its limitations in promoting development and structural transformation.

News | 28 February 2024
© Jerome Bossuet / CIMMYT
GENEVA (ILO News) – A new publication on the expansion of digital economic activity in developing economies, published by the International Labour Organization (ILO), examines what digitalization means for the structural and productive transformation of countries in the global south.

The paper, by Sarah Cook and Uma Rani, Platform work in developing economies: Can digitalization drive structural transformation?, focuses primarily on work undertaken through digital labour platforms – roles such as delivery couriers, drivers and care workers – and tasks carried out on web-based platforms, including professional services such as software programming.

The authors examine the impact of digitalization and how it may contribute towards human, inclusive and sustainable development, as seen through the lens of workers and their conditions of work, and drawing on the experience of workers in the global south.

For many, a central part of the solution to contemporary development challenges – including moving to a greener, digital economy – lies with technology.

However, a key argument of the paper is that while digital technologies are changing organizations and conditions of work, including in low and lower middle-income economies, there is little evidence concerning whether, how and under what circumstances these changes can bring about development and structural transformation.

Based on a synthesis of existing research, evidence and debates, the paper shows that workers in the informal sector are becoming more insecure in their work. In addition, as digitalization advances, even well-educated and skilled workers are facing uncertain working conditions, both in terms of the content of work and the conditions under which they work, thus creating a sweatshop of digital labour, especially in developing countries. Further, these new opportunities do not contribute meaningfully to the local economy or facilitate productive structural transformation.

Furthermore, the research also shows that digital penetration in developing countries often takes place against a background of relatively weak state and institutional capacity, limited fiscal resources, excessive levels of inequality and un- or under-employment, unfavourable terms of global supply chain integration, and the growing financializaton of economic activity.

This context, the authors argue, raises significant questions over whether digitalization can help developing countries catch up and achieve economic prosperity and development in the same way that developed countries did through industrialization. Indeed, increasing evidence demonstrates that development trajectories are not driven primarily by technological change, but that there are other social, economic and institutional forces at work.

In conclusion, the authors point towards key policy actions that would be needed to direct digital economic transformation towards sustainable, fair and inclusive development. These include the regulation of enterprises, social protection, unionization and data transparency. They also consider opportunities for using digital technologies to resolve issues related to workers’ rights, access to benefits and conditions of work, and appeal for further research to better understand these possibilities.

“Rethinking the links between skills, productivity and wages, including understanding how to use an educated or skilled workforce productively, will be critical,” the paper finds, “not only for the workers involved, but also for creating an environment in which learning about, and the adoption and diffusion of, technologies can enhance economic productivity overall.”

The paper was co-authored by the ILO’s Uma Rani and Sarah Cook, of the Southern Centre for Inequality Studies, University of the Witwatersrand, Johannesburg and the University of Nottingham Ningbo, China.