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May 31, 2022updated 31 Mar 2023 5:03pm

Why digital transformation risks widening the divide in job quality

Digital transformation is stoking demand for skilled workers but the 'gigification' of work threatens job quality, researchers warn.

By Afiq Fitri

The acceleration of digital transformation during the pandemic has sent demand for digital skills skyrocketing. The number of tech-related jobs posted by UK employers has boomed, and the start-up sector has swelled its ranks. But the flipside of this digitisation is a growing cadre of workers in the gig economy, where algorithmic management practices threaten workplace wellbeing and job security.

An upcoming government review on the future of work must acknowledge the risk that continued digitisation risks further deepening economic inequality, researchers say.

digital economy job quality
Highly-skilled workers in the UK’s tech industry are set to thrive in the future of work, but experts warn of the deepening digital divide for those on the lower end of the workforce. (Photo by Dan Kitwood/Getty Images)

The post-pandemic tech jobs boom

The pandemic catalysed a widespread shift to e-commerce and remote working, causing demand for digital skills among employers to skyrocket. Job postings data from GlobalData reveals that, since January 2021, there has been a 214% increase in the number of roles advertised for data analysts in the UK, and a 143% surge in demand for information systems managers. 

This demand is also reflected in the swelling ranks of the start-up economy. According to data from Tech Nation, the UK's tech start-up development agency, 4.7 million people now work for start-ups or scale-ups in the UK, up from 3 million before the pandemic. More than a third (36%) of these are in non-tech roles such as sales, finance, legal and HR, it says.

This start-up hiring boom may have peaked, with a number of European tech start-ups announcing redundancies this month. Nevertheless, Russ Shaw, co-founder of Tech London Advocates, believes that this massive growth in tech jobs signals a larger transition happening in the labour market. “The job growth has been absolutely phenomenal and I think it’s indicative of the scale of growth we’re seeing,” Shaw says.

Job opportunities in the digital economy will continue to grow as they dwindle in other, more traditional fields, Shaw predicts. “Companies in the more traditional industries are not going to recruit for high growth any time soon,” he says. Back office support roles in the financial services sector, for example, are likely to decline steadily decline as the industry adopts more automation, Shaw argues.

Growth employment areas in the UK: smart cities, healthtech and the metaverse

The fastest-growing areas of employment in the UK are tech-related, according to GlobalData's thematic analysis of job postings. Jobs opportunities related to smart cities, for example, have grown sixfold since the start of last year.

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This may reflect the government’s £5bn investment in making gigabit broadband available across the country, and its £50m in funding for 5G network rollouts. Smart city projects are underway in Belfast, Birmingham, Bristol, Hull, Manchester, Milton Keynes, and Peterborough. 

Jobs related to the metaverse have grown nearly as much, with job postings in the UK almost quadrupling since then, according to GlobalData. While the sector is still in its early days, the sheer amount of investment being poured into it means that widespread 3D virtual environments might not be too far away in the horizon, Shaw argues.

“There’s a lot of hype around it, so you have to make sure that you go into this with open eyes and be able to decipher hype from reality,” says Shaw. “However, we know the metaverse is coming because many organisations are investing heavily in it."

In addition to technology skills, metaverse jobs will require creative capabilities too, he adds. “People with more traditional creative skills in art, design, television and film are going to be absolutely required for the metaverse."

Job quality in the gig economy

The digitisation of the UK economy is not just creating highly-paid roles for skilled workers, however. The number of people working for gig economy platforms has nearly tripled in the last five years, according to research by the TUC, with just 15% of working adults - or 4.4 million people - now taking part in such platforms. This “spiralling” gig economy could lead to more precarious work defined by low pay and poor conditions, the TUC warned. 

For many, the digital revolution is a threat to job quality - meaning earning potential, job security and workplace wellbeing. "There's been a surge in innovation and job growth, but that is not really equating to the creation of good jobs or the improvement of job quality across industries,” argues Anna Thomas, co-founder and director of the Institute for the Future of Work (IFOW). “What’s happening is that there is also a growth of poorer quality of work, characterised by poorer prospects and widening inequality in wages."

Gig economy workers are also subject to algorithmic management, which has been linked to unfair treatment of workers and unhealthy working conditions. Algorithmic management practices are spreading across the economy, a report by the IFOW warned last year. “Algorithmic systems are being used across the economy to control fundamental aspects of work, driving the ‘gigification’ of jobs," it said.

While fears about automation's potential to displace human employment have proved largely unjustified so far, its impact on the quality of jobs is a more immediate concern, says Thomas. “While we’ve largely moved beyond the doomsday narrative of automation, there’s still not an adequate understanding of exactly how automation is changing ... the terms and conditions of work and the quality of work overall.”

The impact of digital technology on employment continues to demand policymaker attention. Earlier this month, the UK government announced a review into the future of work, which will investigate “short and medium-term barriers and the challenges that the labour market might face, such as the role of automation".

This review must acknowledge that technology's impact on employment is not the same for all members of society, Thomas says. “The key question is how automation will impact different people," she explains. "Is it going to be people centred and create better quality jobs? Or are we going to see these splits in inequality becoming more pronounced?”

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