DOI: https://doi.org/10.62204/2336-498X-2023-4-3

SPECIFICS OF LABOR MARKET TRANSFORMATION

UNDER THE INFLUENCE OF THE DIGITAL ECONOMY

Irina Ignatieva,

Doctor of Economic Sciences, Professor,

National University of «Kyiv-Mohyla Academy», Ukraine,

iignatyva@ukr.net; ORCID: 0000-0002-9404-2556

Vladyslav Holotа,

National University of Life and Environmental Sciences of Ukraine

kn23-v.holota@nubip.edu.ua; ORCID: 0009-0009-1349-287X 

Annotation. Ukraine, like the rest of the world, is in the process of transitioning to a digital economy and society. This transition has been underway for almost half a century, but the pace of change has accelerated as digital infrastructure continues to expand, smartphones become more widespread, enabling universal computerization, and huge amounts of information of all kinds are generated. These changes have turned data into a strategically important asset. We are talking about a change in the global socio-technological order, which results in a complete reformatting of the systems we are used to, the formation of new social and economic strategies of business entities at various levels. At the same time, the technological paradigm is changing, governance models and social norms are changing, and large-scale demographic shifts are taking place. However, the problem is not that the transition to a new model of economic development is taking place in principle. The problem is that this transition is happening at an extremely fast pace – not over millennia, like the agrarian way, not over centuries, like the industrial way, but in just a few decades. In the context of these changes, a new specific digital labor market is emerging. The active development and spread of information technology in society has led to the formation of a new social and labor structure characterized by innovative forms of employment. The emergence of new forms of labor activity, different from those existing in the industrial era, raises questions about their functioning, problematization and deformation. Currently, the social structure of business entities is being transformed; rapid technological progress is creating new requirements for all labor market players; the methodology of hiring employees is changing; flexibility and mobility are increasing; and the level of educational requirements is rising. In all countries of the world, there is a tendency for accelerated growth in the number of groups with intermediate status, which are on the verge of employment, unemployment and economic inactivity. Therefore, it is relevant and timely to study the peculiarities of the digital labor market. The study was based on the use of: method of comparison, generalization – to clarify and formalize the essence of the concept, graphoanalytical method – to provide clarity of the material and schematic representation of a number of theoretical and practical provisions of the study.

Keywords: labor market, digital economy, corporate social responsibility, civil market development, employment.

Introduction. The article analyzes the peculiarities of the labor market development, in particular, under the influence of the digital economy.  The current situation in the business environment of Ukraine requires comprehension and development of certain management and economic tools for adaptation of business entities to new conditions. The article outlines the main directions of changes in the labor market in connection with the development of the digital market.

Results and their analysis. In the context of the rapid transformation of the economic environment of various business entities, driven by the development of digital technologies and the spread of digitalization in all aspects of society, the activities of specialists who create digital technologies, i.e. IT professionals, are of particular importance. The transition to the digital economy is significantly changing the labor market. The active development and spread of information technology in society has led to the formation of a new social and labor structure characterized by innovative forms of employment. The emergence of new forms of labor activity, different from those existing in the industrial era, raises questions about their functioning, problematization and deformation. Currently, the social structure is being transformed; rapid technological progress is creating new requirements for all labor market players; hiring practices are changing; flexibility and mobility are increasing; and the level of educational requirements is rising. In all countries of the world, there is a tendency for accelerated growth in the number of groups with intermediate status, which are on the verge of employment, unemployment and economic inactivity.

In order to understand the trends in the development of IT professionals and employees in the context of digital economic transformation, it is first of all necessary to clearly outline the main processes and megatrends that determine the profile of the future labor market and will influence changes in economic and social relations.

Summarizing the numerous studies on the image of future employment that exist today, researchers identify a number of global trends that will determine the accounting of the digital labor market in the near future [1,2,3].  It is digitalization that is transforming the structure of the economy and, accordingly, various sectors of the economy.  What is digital transformation? In this matter, it is advisable to agree with the conclusions of French researchers that digitalization, in turn, is the use of data and digital technologies, as well as means of ensuring interconnectivity, which leads to the emergence of new activities or changes in existing ones, while the concept of digital transformation refers to the economic and social consequences of the use of data digitization and digitalization technologies [4]. Data is central to digital transformation processes. Working with data is nothing new, but before it became digital, collecting, storing, and managing data was a cumbersome and time-consuming task. Standards for categorizing, structuring, linking, and moving digital data have made it suitable for algorithmic management, which has transformed data into a more meaningful, useful, and therefore valuable resource.

The transition to digital products, digital markets, and their interactions has clear underlying advantages that are manifested in comparison to the previous properties of analog or physical equivalents. These advantages, which are often disruptive in nature, can influence the formation of business strategies in different ways. In order for strategies to be effective in the digital economy and society, they must take these properties into account, and therefore it is advisable to focus on the vectors of the digital transformation of the economy: scale, coverage and speed; property, assets and economic value; relationships, markets and ecosystems. It is digital technologies that have become the driving force behind development in three interrelated dimensions: scale, reach, and speed. Rapid progress in each of these dimensions of these dimensions has, in turn, spurred digital innovation. The fundamental driver for this has been the exponential (rather than linear) growth of computing power over the past half century, with the number of transistors per square inch in an integrated circuit doubling every 18 to 24 months.  Digital products have a significant distinctive advantage of an inverted cost structure. Unlike physical products, which typically have low fixed costs and significant variable costs that decline as production scales up, digital products are more characterized by predominantly fixed costs with low, near-zero variable costs. This characteristic, combined with the global distribution capabilities of the Internet, allows successful businesses to scale rapidly, with access to international markets and sometimes with very few employees or physical assets. Digitalization also accelerates the economic and social activity of businesses. Markets are changing rapidly, innovative ideas are spreading faster, and the time buffer associated with distance is shrinking, as is the time required to identify, engage, and develop a community. Increasingly, the advantage is being gained by pioneers and their followers through agility enhanced by rapid iterative learning.

Another advantage is the change in priorities in investment and attitudes toward property.  Thanks to digital coding and modulation, the vectors of scale, reach and speed are combined in many ways, often reinforcing each other. While in the 20th century real investment was the predominant form of investment and fixed assets accounted for the majority of asset value, since the middle of the first decade of the 2000s, an increasing share of business investment has been in intangible (intellectual) capital rather than traditional tangible assets [5]. According to a report on the global situation with intangible capital prepared by Brand Finance, the global value of intangible assets increased from USD 61 trillion in 2019 to USD 75 trillion in 2021. In addition, according to a study conducted by Ocean Tomo, intangible assets account for 90% of the value of companies included in the S&P 500 index. 

Thus, this advantage provides a competitive advantage and shifts investment flows towards intangible assets, many of which can be digitized. Finally, as a generalpurpose infrastructure, the Internet has become a revolutionary departure from analog communications such as telephone and radio broadcasting. Before the Internet, there was no single infrastructure to connect users, digital assets, and physical objects. The principle of “end-to-end access” on the Internet means that any user can connect to any other user. Thus, digitization is changing the nature of products, and the Internet is enabling changes in the formation, maintenance, and nature of relationships. First, the Internet has made digital products available and usable around the world, radically reducing communication and transaction costs.

This has enabled a shift in production to extended supply chains and global value chains or “clusters”, Combined with the fact that digital products can contain and transmit various forms of information – addresses, code, content, metadata – this has greatly enhanced the ability to interact and exchange data between individuals, businesses, organizations and governments wherever they are located. This not only helps to strengthen bilateral relations, but also supports and enhances the work of markets. Markets are becoming larger, more information-rich, efficient, and complete; they can be managed as massive private enterprises that bring together disparate interests and objects on technologically sophisticated platforms.

Taking into account the above vectors of the digital world, we identify the trends that will shape the scope of future labor relations (Table 1).

Table 1

Digital transformation trends that are changing labor relations

Source: generalized by the authors on the basis of [2,3,4]

Thus, in the digital economy, both the nature of labor and the entire system of labor relations are changing. Digital technologies create a specific labor process and make significant changes to its elements: subject matter, means, technology, organization, and results. In the modern information economy, it is information that is the subject of labor. A feature of the digital labor market is its global nature. The digital labor market involves the interaction of an employer with an employee on a digital platform in the mode of remote work. Employees can be employed remotely across territorial borders wherever their competitiveness and working conditions allow.

The conducted research allows us to formulate that the main difference between the digital market is that the interaction of the digital labor market actors takes place through various online platforms, which are a meeting place for employees and employers, as well as a place to agree on remuneration for services rendered. A product sold in the digital labor market is a labor service created with the help of information and computer technologies.

In order to understand the development of the digital market, it is advisable to analyze global trends. According to the World Economic Forum (WEF), published in The Future of Jobs Report 2023, technology adoption will remain a key driver of business transformation over the next five years. More than 85% of the organizations surveyed in the study identify increased adoption of new and emerging technologies and increased digital access as the trends most likely to drive transformation in their organizations. The wider application of environmental, social and governance (ESG) standards within their organizations will also have a significant impact will also have a significant impact on the wider application of environmental, social and governance (ESG) standards within their organizations. The next most influential trends are macroeconomic: rising cost of living and slow economic growth. The impact of investment on driving the green transition was ranked as the sixth most influential macro trend, followed by supply shortages and consumer expectations around social and environmental issues. The largest job creation and destruction effects come from environmental, technological and economic trends.  As expected, technological progress due to the wider adoption of information and new technologies and increased digital access is expected to contribute to job growth in more than half of the surveyed companies, offset by the expected job losses in one-fifth of the companies due to other factors. [1] Within technology adoption, big data, cloud computing and AI feature highly on the likelihood of adoption. More than 75% of companies are looking to adopt these technologies in the next five years. The data also shows the impact of the digitalization of commerce and trade. Digital platforms and apps are the technologies most likely to be adopted by the organizations surveyed, with 86% of companies expecting to incorporate them into their operations in the next five years. E-commerce and digital trade are expected to be adopted by 75% of businesses. The second-ranked technology encompasses education and workforce technologies, with 81% of companies looking to adopt these technologies by 2027. The adoption of robots, power storage technology and distributed ledger technologies rank lower on the list. Modern organizations estimate that 34% of all business-related tasks are performed by machines, and the remaining 66% are performed by people. This is a 1% increase over the level of automation estimated by respondents to the 2020 Future of Work survey. This pace of automation contradicts the expectation of 2020 respondents that almost half of business tasks would be automated over the next five years, perhaps reflecting the view that machines and algorithms have increased human efficiency rather than automated tasks in that period. Overall, compared to 2020, employers have revised their forecasts for future automation down by 5% (from 47% automation by 2025 in 2020 to 42% automation by 2025 in 2020 to 42% in 2027). Task automation in 2027 is expected to range from 35% of reasoning and decision-making to 65% of information and data processing.

    An analysis of the situation in Ukraine shows that the digital market is one of the few that retains some tendencies for development under martial law [6]. It is worth noting that in Ukraine, if employment is realized in two main forms: e-freelancing (e-lancer) and e-outsourcing. An e-freelancer carries out work remotely using ICT. E-freelancing covers a wide range of economic activities: programming, content creation and translation, market research, sales, consulting, financial accounting, and administration. An e-freelancer does not have face-to-face contact with customers: job search, contracting, receiving tasks, discussing current work issues, submitting work results and paying for them are all done online.  An analysis of the situation in Ukraine’s business environment shows that during the year of full-scale war, the number of IT professionals registered as individual entrepreneurs increased by 31,793, or 13%. In terms of the growth rate of the number of IT workers, 2022 did not differ from the previous year – in 2021, the number of individual entrepreneurs in IT also increased by 13%.  According to [7], in 2022, 87% of Ukrainian IT professionals worked under the sole proprietorship model. About 6% were registered under the Labor Code, another 1% were gig contractors, and in 2023, the number of IT professionals registered in this way may increase. The Ministry of Digital Transformation said in a comment to DOU that the number of gig contractors is growing, but there is no exact data. Some IT companies also declare a shift away from working with individual entrepreneurs and towards other forms of cooperation with IT specialists.

Conclusions. Thus, we can identify the main vectors of changes in the labor market due to the development of the digital market.  First, the boundaries of the traditional division of labor are changing, the boundaries of professions are blurring, the rate of “extinction” of traditional professions is accelerating, and new, previously unpredictable professions are emerging.  Second, forms of employment are changing. Along with traditional contractual forms of labor relations, employment in the form of freelancing, outsourcing, flexible forms of involving professionals in labor activities, remote employment, project-based employment, etc. are actively developing. Third, there is a growing need for human mobility throughout the entire labor activity. This is due both to the intensification of migration processes (military operations, macroeconomic processes, etc.) and to interprofessional, interindustry, and intra-company mobility.

References:

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Natsionalnyi instytut stratehichnykh doslidzhen. URL: http://surl.li/qmctf

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