The tech transformation changes economies. Potential economic benefits from emerging technology are huge, but new problems arise with new opportunities.
Digitisation has redefined the economy, the business, and the job environment, increasing the economy’s income and wealth inequality. Inequalities between companies and employees have increased.
The allocation of capital and labour income is increasingly uniform and the average income from work to capital has changed. The only reason for rising inequality, however, is not technological advancement. Failures in policy were an integral part of the story.
Below are 5 roles technology is playing in promoting income and wealth inequality:
1. Technology as a driver of economic growth
To maintain economic development, technology is regarded as a crucial tool. Taking advantage of water power, accompanied in 1769 by the development of a powerful steam engine, was crucial to Europe’s first industrialization. The second industrialization was probably caused by the internal combustion engine, whereas the third by computer technology. It is at best difficult, challenging, and approximate to assess the technology’s impact on efficiency or economic development. It is difficult because innovation is intertwined with other growth drivers and seldom is it straightforward to emphasize its specific position.
2. Technology and its effect on jobs and wages
Technology’s adoption can maintain competitiveness. The composition and nature of available employment, as well as relative salaries, are, however, affected by technology. Job creation and destruction are still ongoing and the net impact on aggregate employment of technology is uncertain. Increasing labor technology can supplement and improve efficiency for employees. On the other hand, labour-saving technology (e.g. automation) can, for some tasks, replace computer employees. It can also lead to various occupations.
3. Technology and inequality of opportunities
The technology’s ability to reduce the disparity of opportunity is enormous in the right political climate. Advancement in technology has helped make significant breakthroughs in the provision of basic services to the poorest. Digital innovations have increased access to education and training via vast open online learning platforms, including world-leading institutions (MOOCs). Online e-commerce platforms enable small manufacturers globally to promote their goods and develop the new local markets.
4. Inequality through the capture of technology rent
Economic renting and rent-seeking behavior are increasingly correlated with the effect of technology on inequality. Business rents are not a modern phenomenon. However, financial globalization, digitization, and the growth of border technologies are now argued as the enabling circumstances for profit-seeking which trigger severe, prolonged and widening inequality. Finally, innovation, given the limited technical capabilities of LDCs, may lead to income inequality between nations and between the various categories of jobs that have changed their nature, technological skills, and capture rent.
5. Technology and inequality of impact
Combining progress in materials sciences, digital, space, and other innovations have contributed to reducing environmental disparities and reducing the asymmetric effect on the most vulnerable of environmental threats, extremely high weather events, and catastrophes. This is particularly helpful by early warning systems. AI is now able to communicate with high-speed digital connectivity and integrate large datasets and recognise increasingly complex patterns. This data revolution increases people’s awareness of changing circumstances considerably and allows politicians to coordinate decisions.
There are many aspects to the relationship between technology and inequality. Technology has provided fair rewards across a developing economy to allow efficient development and rapid economic development.