Digital economy

There is no official definition of the digital economy. However, the European Commission refers to the fact that digitalisation affects all businesses, albeit to varying degrees. It encompasses businesses that sell goods and services via the internet, and digital platforms that connect spare capacity and demand. It notes that there is no single defining feature of new ways of doing business in the digital space and the different aspects are often combined in a single business. Further, Eurofound defines digitalisation, in research published in May 2018, as follows:

When applied to social systems or organisations, digitalisation refers in a broad way to the transformation brought about by the widespread adoption of digital technologies (robotics, machine learning, sensors, virtual reality and so on). When applied to specific pieces of information, digitisation refers to the process of converting them into a digital form that can be processed by a computer (or vice versa): it can be seen as a driver of digitalisation and encompasses actions performed through technologies, such as sensors, 3D printing or augmented reality and virtual reality. 

The digital economy is also related to the concept of ‘Industry 4.0’, widely regarded as the fourth and next phase in the digitalisation of the manufacturing sector. Industry 4.0 is the term given to production processes with fully integrated automated facilities which communicate with one another.

The European Commission has developed a Digital Economy and Society Index (DESI) in order to monitor the progress of Member States in dealing with the digital economy and its effect on society. It covers five dimensions: 

  • connectivity
  • human capital
  • use of the internet
  • integration of digital technology
  • integration of digital public services

The latest DESI results for 2017 show that Denmark, Finland, Sweden and the Netherlands have the most advanced digital economies in the EU, followed by Luxembourg, Belgium, the UK and Ireland. Romania, Bulgaria, Greece and Italy have the lowest scores on the DESI. In 2016, all Member States improved their DESI ratings, with Slovakia and Slovenia progressing the most (more than 0.040 as opposed to the EU average of 0.028), but there was only a small increase in Portugal, Latvia and Germany (below 0.020).

The growth of the digital economy offers both opportunities and challenges to workers and employers. In terms of the effects on employment, Osborne and Frey’s 2013 study on the impact of computerisation on employment levels in the USA argued that nearly 50% of jobs would be at risk in the next 10–20 years. Subsequent adapted calculations carried out for Europe estimated that somewhere between 40% to over 60% of EU jobs are at risk from automation, with medium-skilled jobs considered most at risk. 

Digitalisation may mean that the tasks and occupational profiles of workers in Europe will change, with those in physically demanding or routine jobs being relieved or supported by robotic engineering. This means it is crucial to ensure that workers have the right skills for future jobs.

Digitalisation gives people opportunities to work away from the workplace, including at home, and provides new opportunities to organise work and family life. This also brings benefits to employers in terms of fewer days lost due to the inability to work, and longer working lives due to less strenuous working conditions.

A 2017 joint report by Eurofound and the International Labour Organization (ILO) examines the positive and negative effects of telework and ICT-mobile work on the world of work, based on research in 15 countries and data from the European Working Conditions Survey 2015.

See also: crowd employment; gig economy; employee sharing; ICT-based mobile work; new forms of employment; telework; work–life balance


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