THE IMPACT OF DIGITALIZATION

ON THE LABOR MARKET

Thesis

By

Darina Gurkina

Submitted in Partial fulfillment

Of the Requirements for the degree of

Bachelor of Science

In

Business Administration

State University of New York

Empire State College

2017

Reader: Tanweer Ali

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 Originality Statement

I, Darina Gurkina, hereby declare that the material contained in this submission is

original work performed by me under the guidance and advice of my mentor, Professor

Tanweer Ali. Any contribution made to the research by others is explicitly

acknowledged in the thesis.

I also declare that this work has not previously been submitted in any form for a degree

or diploma in any university.

Darina Gurkina, April 7th, 2017.

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 Acknowledgements

This thesis has been quite challenging and complicated. The amount of reading and

research that was undertaken in order to find the answer to the question was large. The

topic was not easy but incredibly interesting.

I offer my sincere gratitude to my mentor, Professor Tanwer Ali for his guidance, useful

critique and patience with all drafts delays. Thank you for the opportunity to write

exactly about what I wanted and chose writing direction by myself.

I am very glad and happy that I finally did that. That is something to be proud of.

Darina Gurkina

Prague, April 2017

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 TABLE OF CONTENT

I. Introduction ......................................................................................................... 6

A. Research Method ................................................................................................ 9

II. Digitalization ..................................................................................................... 11

A. Digital Revolution ............................................................................................. 11

B. Digitalization by countries ............................................................................... 13

C. Business digitalization ...................................................................................... 17

D. Data .................................................................................................................... 22

III. Labor Market .................................................................................................... 24

A. Job creation and job loses ................................................................................ 25

1. Digitalization and self-employment ................................................................. 28

2. Ranking of top companies 1990 – 2015 ........................................................... 29

3. Digitalization and low-skilled and high-skilled jobs ...................................... 32

4. Digitalization and new jobs .............................................................................. 34

B. Hard and soft skills in-demand........................................................................ 36

1. Top most and least in-demand soft skills ........................................................ 38

C. Skill mismatch ................................................................................................... 41

D. Contribution of governments and companies to education and skills

development ............................................................................................................... 42

IV. Conclusion ......................................................................................................... 47

V. Bibliography ...................................................................................................... 51

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Abstract

This thesis investigates the relationship and the impact of digitalization on the labor

market. The paper focuses on structural labor market issues and analyzes how the

development of digital technologies penetrate on the labor market, which impact it has

on the ranking of the companies as well as on skills and occupations in-demand.

This paper will also examine the beginning of the digital revolution, the concept of Big

Data and answer the question why Big Data is vital for business today.

The impact of digitalization on the labor market is large, it influences everything

starting from ranking of the companies and finishing with skill in-demand.

Keywords

Digital business, digitalization, digital revolution, labor market, data.

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I. Introduction

The power of new digital technologies is simply everywhere. The Internet became

broadly available in 1991 and 26 years later 3,7 billion of people have an access to it.

Social media was some unknown phenomena just 15 years ago, and by 2017 already

2.78 billion of people all over the world actively use it on the everyday basis. 4,9 billion

of people in the world have their own mobile phones which means that about 66% of

people around the globe have an access to mobile connection (Kemp, 2017).

The newly appeared 21st century’s economy differs significantly from what it was 15 –

20 years ago. Back then the economy was very structured although not stable enough.

The 1997 and 1998 financial crises caused “sharp decline in output and trade” (United

Nations, 2001, p.7). World economists have suggested the recovery period to be long

and thorny. However, it turned out that the crisis was quite short-lived. So the recovery

happened in the small amount of time during 1998 and 1999, although unevenly, and

already in 2000, the world trade has resumed. The growth has improved worldwide but

primarily in developed countries and those economies being in transition towards the

development. Such a great performance was associated “with an acceleration in the

growth of international trade (United Nations, 2001, p.7). So that was the state of

economy back to 2000 after the financial crises. After that, the economy was hardy

influenced by two trends going together: globalization and the beginning of

digitalization (which in 1999 was expressed only in the internet growth) (Hansen,

1999).

Nowadays the economy is way different. It is more mature, more digitalized.

Appearance of high-quality and powerful technologies brought huge changes in all the

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aspects of human’s life including economy, business environment and labor market.

The economy is driven by innovations, primarily by the development of technologies

and the concept of Big Data. If companies want to be successful, want to catch up with

the market and benefit from it, they need to adjust to these new unfamiliar

circumstances, adopt technologies to their businesses and take data into account while

organizing the working process. Shortly, by doing so businesses become digitalized and

the traditional approach towards doing business is no longer effective and does not

bring expected results.

Technologies are moving so quickly that it can even be truly challenging to pay

attention and notice all the changes happening. “Technology advancement continues to

drive economic growth. Economically disruptive technologies transform the way people

live and work, enable new business models, and provide an opening for new players to

upset the established order” (Manyika, Chui, Bughin, Dobbs, Bisson & Marrs, 2013,

p.5). Since the time of Industrial revolution of the early 19th century, information

technologies have gained a unique role to transform economies and increase economic

growth. (Manyika, Chui, Bughin, Dobbs, Bisson & Marrs, 2013, p.1).

Such a massive development of digital technologies, strong penetration of revolutionary

and world leading companies (such as Google or Apple) in people’s lives, notable

shakeups in the world economy have brought solid changes to the labor market

(Rahmil, 2014). The labor market has significantly evolved and developed for the past

15 – 20 years, certain professions have disappeared due to the absence of their

necessity, others have become more demanded, the number of positions offered on the

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market has increased. So has the need for the development of certain skills to performs

these jobs.

Such a significant and massive explosion of digital technologies constantly evokes

debates over the impact of technologies on the labor market whether it serves as an

opportunity to create lots of new jobs on the market or on the contrary it significantly

limits the number of jobs available in different industries and serves as the contributor

to the deep structural unemployment. The impact of digitalization differs from country

to country and from sector to sector, it is uneven. One of the main things that

determines the impact of digitalization on the country is its economic structure. For

example, usually, the more developed the economy is, the more benefits the country

gets from digitalization that are significant for the economic growth (Sabbagh,

Friedrich, El-Darwiche, Singh, Koster, 2013, p.35).

Digitalization has also changed the ranking of the top companies and significantly

increased their market capitalization. By 2015 the market capitalization of the 10 first

US company on the list was higher than the total market capitalization of top 10 fastest

growing companies on the list in 1990.

Although digitalization has already started and brought huge changes to certain aspects

of the labor market (defined demand for skills and jobs, created and made certain jobs

disappear, changed the positions of the companies in the ranking by growth and market

capitalization etc), the main impact of the technological era is still ahead and mainly

remains uncertain to a pretty high degree (Walwei, 2016, p.5).

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 A. Research Method

The investigation focuses on finding the relationship between digitalization and its

impact on the labor market. In order to do that, academic sources (such as books and

articles in academic journals), publications (from such organizations as International

Labor Organization, McKinsey and company, PWC and World Economic Forum) and

other useful materials were used.

Digitalization and structural labor market issues were carefully examined on certain

case studies and research papers such as the case of Germany in the book by Ulrich

Walwei. The author investigates interconnection between the development of

digitalization and its impact on the labor market of Germany and author finally proves

the existence of that relationship. Another academic paper (written by Eichhorst, Hinte,

Rinne and Tobsch) looks at the evidence on the effects of digitalization on the labor

market in Germany and other developed countries. The discussion paper by Grass and

Weber examins the impact of digitalization on the labor market in Europe. All the

academic papers that have been used in this particular thesis were investigated and

examined in order to find the impact (whether positive or negative) of digitalization

process on the labor market. The paper by Grass and Weber (2016) states that “on the

one hand is the fear of massive jobs loss if networked robots make today’s jobs

redundant, and on the other hand there is hope for great gains in employment and

innovation”. Academic papers, publications and all sources used vary on the degree of

the revealed impact of digitalization on the labor market, however, this impact is not

denied. So, this thesis gives a comprehensive overview of academic and reliable sources

and measures how digitalization influences the labor market.

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In order to see the long-term trend of the influence of digitalization on the labor market,

sources were taken from different periods of time, starting from the 1990s to get a

comprehensive analysis of the state of economy and labor market at that time. Along

with the latest 2017 reports, research analyzing the interrelations between labor market

and digitalization that included the predictions for the situation on the labor market up

to 2025 have also been used.

The aim of the paper is to prove that digitalization noticeably influences the labor

market in different ways and that labor market of today differs from what it was back to

15 – 20 years ago when digitalization did not yet spread all over the world. This is done

by looking at the data available about labor market of today and comparing it with the

data from the 1990s – 2000s. So, the paper looks at well-paid jobs in-demand and

fastest growing occupations today and back when digitalization did not yet have such a

severe impact, defines soft and hard skills in-demand today and before digitalization.

Paper compares the ranking of companies in 1990s and today, their growth and market

capitalization. The analysis is both Quantitative and Qualitative. The aim is to get a

more comprehensive answer and define the degree of the development of digitalization

and its impact on the labor market.

As it was already mentioned, despite the fact that the digital revolution has already

started, the main impact of it is still ahead, so it is impossible to predict the exact future

consequences being one hundred percent confident. However, the impact of

digitalization is already noticeable, so it is possible to see whether digitalization has an

impact on the labor market and to which degree.

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II. Digitalization

Digitalization is “an ongoing adoption of digital technologies across all possible societal

and human activities” (Clerck). In business, digitalization can be described as “the use

of digital technologies to change a business model and provide new revenue and value-

producing opportunities” (Gartner).

A. Digital Revolution

Digitalization of information and communication process has led to an explosion of

information (also referred to as the “Big Data) and has driven the computerization of

production, service delivery, and even the private sphere (Walwei, 2016, p. 2).

Back to 20 years ago to the beginning of the first Industrial Revolution and later on the

Second Industrial revolution, “the global economy has been on a step growth trajectory

propelled by a series of advances in technology. Steam engines have replaced water

mills to electricity, emergence of telephones, automobiles, airplanes, transistors,

computers and finally the Internet “each new wave of technology has brought about

surges in productivity and economic growth, enabling efficient new methods for

performing existing tasks and giving rise to entirely new types of business” (Manyika,

Chui, Bughin, Dobbs, Bisson & Marrs, 2013, p.23).

However,1965 can truly be called the year of the premise for Digital revolution and the

development of technologies. Gordon Moore, Intel co-founder made the observation

that “as transistors got smaller, the number of transistors that fit onto an integrated

circuit grew exponentially” (Atkinson, Castro, 2008, p.7), so that the “number of

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transistors placed on a single square inch of an integrated circuit chip would double

every two years” (Investopedia, 2015). Later on after some minor configurations this

prediction of Gordon Moore was considered as a law and called “Moore’s law”. The

technological development or better say the adoption of technological innovations by

people and their penetration to the market started quite erratic. Back to the 1980s –

1990s the mobile telephone was perceived as a luxury device or even as a toy rather

than an integral part of everyday life for more than half of the people all over the world

(Raja, Ampah, 2016, p.1). Indeed, nowadays people can not imagine their typical day

without using the mobile phone for social medias, messaging, incoming and outgoing

calls, surfing the internet etc.

Moore’s law has further led to “steadily increasing performance” (Walwei, 2016, p.2)

and enabled the future production of computers, Internet and mobile cell phones.

Further digitalization of information has led to appearance of so-called “Big Data”

concept and resulted in “advances in areas such as Machine Learning, Artificial

Intelligence and Mobile Robotics” (Walwei, 2016, p.2). Together with high usability of

Big Data, it further led to the computerization of the economy. So, digitalization drives

the progress of technical development of the economy and is increasing both

productivity in general and labor productivity in particular.

The digital information revolution does not aim to create a completely different world

but to make it function in a better, more efficient and effective way “with individuals

and organizations able to access and use a vast array of information to improve their

lives and society” (Atkinson, Castro, 2008, p.3).

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 B. Digitalization by countries

The degree of digitalization as well as its impact differs from country to country and the

tendency is that the more advanced and developed the country is the greater the impact

of digitalization is (El-Darwiche, Singh, Ganediwalla, 2012, p.6). There are six scores

that help to measure a country’s digitalization. They are ubiquity (which is the degree to

which consumers and companies have an access to existing digital services. 3G mobile

connection penetration and mobile phone penetration are the examples of ubiquity),

affordability (the degree to which digital services are priced so they can be affordable

by people. Examples are the fee for mobile connection and internet use tariff),

reliability (the quality of connection of digital services. An example is the fee or

investment per telecom subscriber), speed (the degree of data throughput. International

Internet bandwidth is a good example of the speed attribute), usability (the easiness of

use of digital services. Examples could be IP addresses and domain names per country

per one hundred people) and finally skill (which is the ability of consumers and

companies to implement digital services into their personal lives and businesses. An

example is professions such as engineers or IT specialists per one hundred people)

(Sabbagh, El-Darwiche, Friedrich, Singh, 2012, p. 8-9).

Based on the data from 2009 and 2010 Booz & Company conducted a comprehensive

study called “Maximizing the impact of digitalization”. Having a sample of 150

countries Booz & Company evaluated them on a scale from 0 to 100 (0 being the lowest

and 100 being the highest) based on 6 criteria mentioned above. After precise

evaluation, they distributed 150 countries into 4 categories that reflected the stages of

digitalization development in the countries: constrained economies (digitalization score

below 25), emerging economies (a score between 25 and 30 and higher), traditional

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economies (digitalization score is in the range between 30 and 40) and advanced

economies (which is the most mature stage of digitalization development having the

score over 40) (Sabbagh, El-Darwiche, Friedrich, Singh, 2012, p. 8 – 11).

Figure 1 – Stages of digitalization, 2010 digitalization levels.

Source: (PWC, 2012). Link:

http://www.strategyand.pwc.com/media/file/Strategyand_Maximizing-the-Impact-of-

Digitization.pdf

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Ethiopia has the lowest score (1.9 out of 100) in the comparison charter. It is defined as

the country on the constrained economy stage having(still) expensive services that are

limited in reach, as one of the main characteristics of that type of the economy stage

(Sabbagh, El-Darwiche, Friedrich, Singh, 2012, p.8). Yemen, Cuba, Uzbekistan,

Bangladesh, Cambodia, Kyrgyzstan and other countries are among those being on the

constrained economy stage as well (El-Darwiche, Singh, Ganediwalla, 2012, p.5).

Countries such as Indonesia, Botswana, Venezuela and Montenegro are on the

emerging economy stage (El-Darwiche, Singh, Ganediwalla, 2012, p.5), where the

reliability of services is considered to be below par and also their capacity is quite

limited (Sabbagh, El-Darwiche, Friedrich, Singh, 2012, p.9). Philippines, New Zealand

and Argentina are defined to be on the transitional economy stage (El-Darwiche, Singh,

Ganediwalla, 2012, p.5). In these countries citizens are provided with an access to

reliable, affordable and ubiquitous services but the skill, usability and skills

characteristics of the services are still not enough developed (Sabbagh, El-Darwiche,

Friedrich, Singh, 2012, p. 9 – 11). The last stage is and advanced stage. Czech Republic,

US, Luxembourg, Norway and Russia are on that economy stage (El-Darwiche, Singh,

Ganediwalla, 2012, p.5) where all of the six indexes used in the research are the real

characteristics of the existing services in these countries (Sabbagh, El-Darwiche,

Friedrich, Singh, 2012, p.11).

So, by 2009 – 2010 the top 10 countries being on the highest stage of digitalization

development were the following: Norway (1st place), Island (2nd place), Korea (3rd

place), Hong Kong, Switzerland, U.S., Luxembourg, Taiwan, Canada and finally Israel

(El-Darwiche, Singh, Ganediwalla, 2012, p.5). By 2017 the situation has changed.

Today, there are other top 10 leading countries that are “the most digital-savvy

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countries in the world”. Here they are respectfully to the order on the list: Singapore

(1st place), Finland, Sweden, Norway, United States, Netherlands, Switzerland, United

Kingdom, Luxembourg and Japan (World Economic Forum, 2016).

At the same time, Booz & Company study also analyzed the 10 least digitalized

counties by 2009 – 2010. These were the counties being on the very first stage

(constrained economies) meaning that the country on the constrained economy stage

has still quite expensive services that are limited in reach. These 10 countries were

Ethiopia (lowest score), Comoros, Niger, Burkina Faso, Madagascar, Afghanistan,

Lesotho, Mali, Rwanda and Yemen. Interesting fact is that eight out of 10 countries are

located in Africa. And again by 2017 the order of top 10 least technologically

developed countries has change. Now these countries are Haiti (least developed

country), Bhutan, Cambodia, Burkina Faso, Lesotho, Mozambique, Tanzania, Laos,

Sierra Leone and finally Uganda (Roy, 2015). Couple of countries that were on the list

of least digitalized countries 8 years ago are still on the list. Some countries were added,

others increased in the degree of digitalization. However, when measuring all the

countries from both lists (of 2009 and 2017), they all are still on the constrained

economy stage where digitalization still has very little impact on human’s life, business

environment and the labor market. Statistics of 2017 shows that only 5 out of 10

countries are Africans countries. Today, Africa is still considered as one of the least

digitalized region of the world but it is on the way to the better development of

technologies and higher digitalization. However, the statistics shows that Africa is

improving in terms of the degree of penetration of information technologies. According

to McKinsey (2013) report “Lions go digital: The Internet’s transformative potential in

Africa” there were 167 million users by 2013 and the percent of Internet penetration

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was 16%. McKinsey assumed that by 2025 the number of Internet users would achieve

600 million and 50% would be the rate of Internet penetration. For the past 4 years after

the research was done (by 2017) the numbers have increased. 362 million is the number

of Internet users in Africa (which is twice bigger then the statistics from 2013) and the

Internet penetration percent is 29% (which is almost twice bigger comparing with 2013)

(Kemp, 2017). When comparing these numbers with other regions, numbers seem rather

small. So, for example by 2017 the number of internet users is 718 million in the US,

1.909 billion in Asia-Pacific and 637 million in Europe and the percent of Internet

penetration is 71 in the US, 46 in Asia-Pacific and 76 in Europe. However, it is

important to understand that Africa is still on the beginning stage of digitalization

whereas America, Europe and Asia-Pacific regions were affected by digitalization from

the very beginning. McKinsey claims (2013) that “Africa is going digital” (McKinsey,

2013, p.1). The numbers are increasing due to the fast increase of mobile networks

build out and continuous decrease in the cost of Internet-capable devices. Africa just

like other regions is on the digitalization pass, it just would take it more time to achieve

same result as other regions have already done.

C. Business digitalization

“If you’re running a business and need to create guidelines for digitalization, this is my

advice: think big, and think ahead” (Lindgren, 2015).

For many years the approach towards business and its goals remained completely the

same. It was such a model when the goods or services were provided to the customers

in exchange for certain compensation and the fundamental goal was to make money for

17
the owners and investors. Huge amount of money was spent primarily on operations as

well as providing goods or services to the customers and on salaries.

For the moment the model itself as well as the goal to make money did not change

significantly (as the primary goal of any for-profit organization is to generate income)

but the way of doing business did. Nowadays, in order for businesses to catch up and

win over the market and not to find themselves in a challenging predicament getting no

or low response from the customers while investing tones of money in things like

marketing campaigns businesses have to adjust to the new conditions.

Digitalization became large-scale and impetuous transformation across different aspects

of business, being the great source of huge opportunities for growth and development

and a major source of risk at the same time. Business leaders admit that “the role of

digital technologies is rapidly shifting, from being a driver of marginal efficiency to an

enabler of fundamental innovation and disruption (World Economic Forum, 2016, p.3).

In such a rapidly developing economy and the world of digital technologies “enterprises

need to constantly reinvent their offerings to keep up with the rapidly evolving

expectations of digital customers”. (World Economic Forum, 2017, p.10).

Becoming a digital company requires more actions than simply investing in the latest

digital technologies. World Economic Forum (2016) identifies a number of

recommendation for those companies that are on the path of digital transformation.

Enterprises have to identify and launch a new digital model that perfectly suits the

company and is appropriate and would be efficient during the digital transformation.

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Also, companies have to re-examine all the aspects of operations. The digital company

is the one that creates value in core businesses meaning that business leaders are

constantly analyzing how customers are served and thinking on the improvements of

that process. The companies look at all steps of customers’ “journey” in order to buy

certain goods or receive certain services and ask themselves the question such as “what

can be done in order to improve that process”? Which steps are needed to be undertaken

to make customers journey faster, easier, more pleasant? Let’s look at the very simple

example. Let’s imagine that there is an online company offering clothes and shoes. For

example, the customer is trying to buy a pair of boots online. Could the customer easily

find the needed pair? How much time did it take him? Did the customer leave the page

not buying the shoes? Did the customer buy only shoes or was also interested in any

other supplementary products? How fast will the customer receive shoes? These are just

the very small part of the questions managers have to answer. That is the moment when

data and metrics are needed and are crucial. This is clearly not a one-time thing.

Managers work with data not to “deliver a one-off customer journey” but to work with

customers’ input the way that it is constantly implied to get and increase customers

loyalty (McKinsey, 2015).

Within the time of technological changes and digitalization companies had to learn and

evolve (Raja & Ampah, 2016, p.1). So today the digital company is about growth and

market potential to open and get the benefit from it. This company does not postpone

everything for next but it does concentrate on now.

A very important step to do is considering investment in security. “No locale, no

industry or organization is bulletproof when it comes to the compromise of data”

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(Verizon, 2016). The number of cybercrimes of data breach is constantly significantly

increasing. Back to 2013, the number of data breaches recorded in the U.S. was 614

(Identity Theft Resource Center, 2013) and in 2015 it was already 781 (Identity Theft

Resource Center, 2015) which is 27% more than 2 years ago. Whereas the statistics

from 2016 shows that the number of incidents has increased by 40% and have reached

1093 data breaches (Identity Theft Resource Center, 2016). Data breach cost is very

high. The global cost of cybercrimes is estimated to reach 2 trillion US dollars by 2019

and the average cost per data breach is 4 million US dollars (Laberis, 2016).

The next thing that is very important for businesses being on the digital transformation

stage is gaining new characteristics that would be helpful. Probably the main and

critically important characteristic for the successful digital company is the agility. It is

the ability of the company to change rapidly in a unified and integrated way due to the

outside factors (McKinsey, 2015). Nevertheless, it is important to realize that agility

does not affect core processes. This means that despite the fact that the company has to

have fast reaction and be able to change external, internal and core processes and

principles that lead company forward should not be affected by the actions towards

digital changes.

Knowing your customers is another primary thing for the digital business. However,

except this, it is crucial to determine what these customers want and need which is one

of the main important features of the digital company. It is needed not only to oversee

and make the “customers’ journey” easier but also to deeply understand what customers

really want. Every successful digital company on the first place has to determine what

customers are thinking throughout their decision journey and work in order to meet

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those expectations. This requires answering the questions “what customer’s unmet

needs are” and how to meet them. It requires huge amount of time to dig into

customers’ desires but it does pay off.

Being digital requires deep analysis of the market, «point determination» of the target

audience from the business leaders as well as finding the missing spots, missed

opportunities by competitors and filing these “blank spaces” with company’s products

of services allowing to expand commercial growth opportunities.

Many companies are worried and even scared to go towards digitization of the company

as it is associated with lots of risks, possible losses of revenues, shares, capital,

reputation etc. Nevertheless, an important thing to remember is that successful digital

companies are not afraid and are willing to take risks. That does not mean that these

companies act ahead but they think carefully about possible risks the companies are

taking.

The experiments with new offerings to the market, propositions or new products or

services is a very effective way of learning the market, learning the customers, their

reactions and preferences. Changes are risky but it is a great way to learn what can work

on the market. The digital company should find good and efficient strategy by constant

experiments and tests and when it finally finds one, the company should put all the

resources behind it in order to support it. Targeting is a good thing although pretty risky

one but this approach is the one the successful digital companies have.

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The last recommendation from the World Economic Forum (2016) is to “understand

and leverage data”.

D. Data

They say that “data is the lifeblood of business” (Frank Davis, 2013) meaning that data

is incredibly enormously vital for businesses nowadays. Digital data is the fastest

growing commodity. Data drives transformation around the world, it brings significant

changes to the businesses around the globe. “The world has become excited about big

data and advanced analytics not because the data are big but also because the potential

for impact is big” (Court, 2015). None business nowadays can become really successful

without taking data into account and analyzing it and most businesses realize that “if

they capture all the data that streams into their businesses, they can apply analytics and

get significant value from it” (SAS). The benefits that big data analytics bring today are

efficiency and speed, so businesses can extract exactly needed information that allows

to make immediate decisions and those companies who can do that (and can do that

effectively) get a competitive advantage over organizations that do not properly work

with Big Data.

Big Data concept has appeared widely in the beginning of the 21st century and

companies that started to use Bug Data analytics first were online and start-up

companies. Big Data analytics “examines large amounts of data to uncover hidden

patterns, correlations and other insights” (SAS). Back to 2002 and 2003, Gartner

(former META Group which is now part of Gartner) identified famous “3Vs” (Data

Volume, Velocity and Variety) that are “essential to understand how and why

information could be captured, analyzed and learnt from” (Marr, 2015).

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Big Data analytics is a great tool for organizations to identify new opportunities and in

turn make smart businesses moves, increase the efficiency of operations and lead to

increase in profit. Big Data analytics is vital for companies for several reasons. First of

all, Big Data analytics helps companies to make fast and efficient decisions while

immediately analyzing information and make these decisions based exactly on what

companies have learnt from this information. Secondly, analytics helps to get to know

customers better. So, by analyzing customers’ purchasing behavior, their feedback

companies understand customer’s needs and preferences and would give them exactly

what they want, create and develop products and services way up to the point when it

would match customer’s desires. Also, Big Data technologies serve as a cost reduction

tool when it comes to “storing large amount of data” (SAS). It is impossible to

understand and evaluate the companies’ performance in terms of how efficient it is

working. Big Data analysis helps organizations to over perform their competitors as “a

great deal of the market sentiments related to the organization and and its competitors

can be understood” (Big Data Analytics News).

Providing Big Data solutions is something that world famous analytical companies such

as Oracle or Teradata do – they help businesses to set up the analytical process within

the company with the use of analytical tools and machines. These companies help

companies to “deliver better business outcomes through technology-enabled solutions

in the areas that matter most – from operational excellence and asset optimization, to

customer experience and productions invocation, to finance transformation and risk

migration” (Teradata).

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III. Labor Market

“Men and women of today and tomorrow, who were taught to rely on certainty, will

have to observe further developments in the world that surrounds them and live in a

world of complexity and uncertainty. They need to develop their own capacity to

innovate, adapt to change and management instability” (Preda, 2002, p.80).

Indeed, this saying is true when speaking about the nowadays labor market. There are

many factors that have an impact on the future performance of the labor market. Here

are the four factors that are considered key ones. They are “demographic development,

the competitiveness of the nation economy, globalization and last but not the least is

technological change or digitalization” (Walwei, 2016, p. 2). Let’s look at these factors

in a bit more details and concentrate on the last one which is technological change.

Demographic development defines the level of the labor force. The competitiveness of

the national economy means the creation and institutional setting that will protect

property rights and well as provide the support for structural changes and “offer an

efficient system of education, training and social security (Walwei, 2016, p. 2).

Globalization in its turn is the factor that makes countries to specialize in those goods

and services the country has the comparative advantage in and would allow to

demonstrate the potential in particular skills and stimulate the “implications for their

particular skill formation” (Walwei, 2016, p. 2). Technological change is of a particular

interest as this is considered as a prevailing factor out of four listed. It is the key

determinant of economic growth and productivity (Walwei, 2016, p. 2).

Artificial intelligence, autonomous vehicles, Big Data analytics and clouds, Custom

manufacturing and 3D printing, Internet of Things (IOT) and connected devices, robots

24
and drones, social media and platforms and many more are “among developments

radically changing prospects for the type of jobs that will be needed in the future and

how, where and by whom they will be done” (The Organization of Eastern Caribbean

States, 2016).

Such a significant and massive explosion of digital technology constantly evokes

debates over the impact of technologies on the labor market whether it serves as an

opportunity to create lots of new jobs on the market or it. The impact of digitalization

differs from the country to country and from sector to sector, it is uneven. (Sabbagh,

Friedrich, El-Darwiche, Singh, Koster, 2013, p.35).

The digital transformation has brought both opportunities and threats for the labor

market. It has positive as well as negative impact on the labor market. The digitalization

effect 3 things: job creation and job loses, expectation for the skills in demand for the

“jobs of the future” and the way education system and labor market respond to these

requirements and changing working conditions (European Parliament, 2016, p.6).

A. Job creation and job loses

Digitalization creates demand for some jobs and decreases it for others. Even at the

early stage of digitalization development, it has already had a severe impact on the labor

market. The charter below is based on the data from 2000 – 2010 and demonstrates the

10 fastest growing professions fort that period of time. Each of the 10 professions grew

at least by 50% for the 10 years (Bureau of Labor statistics, 2001). Important to mention

is that 8 out of 10 jobs are related to technologies.

25
Figure 2 – The 10 fastest growing occupations, 2000 – 2010 (in percent)

Source: (Bureau of Labor Statistics, 2001). Link:

https://www.bls.gov/opub/ted/2001/dec/wk1/art02.htm

So, digitalization started to bring changes to the labor market from the very beginning.

By 2017 the tendency of technological professions to be in robust demand has persisted.

Today, most in-demand and the top paid jobs are Data scientist (with annual salary of

$110,000), Data engineer (who designs and builds programs to create large data sets.

The annual salary is estimated $106,000), Analytics manager (who analyzes large

quantities of data and creates long-term and short-term strategies for the companies to

increase revenue and make processes more efficient. $112,000 is a yearly salary),

marketing manager (with the annual salary of $90,000 marketing manager performs

marketing analysis of the market, formulates and implements marketing plans to

promote and boost the company, thinks of strategic actions to engage customers in

social media programs and many others tasks) and many others jobs in technology-

related fields (Picchi, 2017).

26
However, along with information technology industry being in the very high demand

and growing fast (18,8% is the number estimated for the growth for the period 2014 –

2024 in the US by US Bureau of Labor Statistics) there are other non-technology related

industries that are in a high demand and are constantly growing (Bureau of Labor

Statistics, 2015). Healthcare industry is one of them. Registered nurses (16% of growth

for the period 2014 – 2024), personal care aides (25,9%), home health aides (38,1%),

nursing assistants (17,6%), medical assistants (23,5%) and others are in a constantly

existing demand. Despite the difference in salary between software developers ($95,510

for 2014) and nursing assistance ($25,100), the growth of demand for healthcare

industry professions is sometimes higher than for technology-related industries

(Bureaus of Labor Statistics, 2015).

This is not any kind of surprise and is easily explained. According to the United Nations

statistics (2015) “one in eight people worldwide was aged 60 years or over” in 2015.

United Nations estimated that by 2030 the number would be not one in eight people but

one in six people. So by 2030, the number of older persons will outreach the number of

children aged 0 – 9 years (1,4 billion versus 1.3 billion respectfully) (United Nations,

p.3, 2015). The World population is ageing, almost every country in the world

experiences growth in the number of older people as well as their proportion. That is a

quite serious issue which has become “one of the most significant social

transformations of a twenty-first century” (United Nations, 2015, p.3). Older people

face many illnesses most of which are chronical, they require regular medical attention.

Despite the impact of digitalization on the healthcare industry, the tasks of these jobs

cannot be automated. Today, when it comes to the close contact with people, this type

27
of job cannot be performed by machines. So, the increase in a number of ageing

populations increases demand in the jobs in the healthcare industry.

However, healthcare industry related jobs are not the only in solid demand for today.

Industries such as education, law, finance, customer services are in-demand as, despite

the development of technologies, some tasks still cannot be fully and perfectly

automated. The software program can calculate taxes for the client company but the

question is whether it will take all details into account? The program may know all

existing laws in the world but would it be able to correctly apply them to the concrete

situation taking into account all the details and clients preferences? Law cases can be

too nuanced and complicated and require human’s brains to for example draw a parallel

between two cases that seemed completely different on the first sight but the motives of

the crime turned out to be the same. Technologies make a huge impact on education but

there should always be a real person, a human to supervise people and interact with

them.

1. Digitalization and self-employment

In contrast with industries and occupation that are hardly influenced by digitalization

and this impact is significant and visible, there is no direct evidence of the impact of

digitalization on self-employment on the labor market. Self-employment remains an

important source of jobs in the world. Self-employment rate is “the proportion of total

employment made up of self-employed workers” (Hipple & Hammond, 2016, p.3).

Here is the statistics of self-employment rate in different countries in 1990 and 2015. In

the UK 15.10 was the self-employment rate in 1990 whereas by 2015 the rate has

decreased to 14.94. In the US 8.80 was the rate in 1990 and 6.46 is the rate in 2015. In

28
1990 Spain had one of the highest rates of self-employment 29.82 and rate has

decreased to 17.37. 11.35 in 1990 in Norway and 7.02 in 2015. 22.32 was the rate in

1990 and it decreased almost twice and became 11.06. So the trend is clearly traced, the

self-employment rate either remained more or less the same or decreased in most of the

countries (The Organization of Eastern Caribbean States, 2016). It is hard to claim that

digitalization has caused shifts in the rate of self-employment as there are many other

factors that influence it. For example, lack of vacancies can be one of the reasons why

people consider the opportunity of being self-employed. Government incentives and

laws can also serve as the potential reasons that influence the rate of self-employment

(Parliament. 2015). The impact of digitalization and the development of technologies on

the self-employment rate can be examined from different sides. So, on the one hand,

market entry cost is high in the digitalized era. The environment is extremely

competitive, new emerging start-ups should be technologically well equipped in order

to be able to compete and win over the market. So, it became rather expensive to be

self-employed. However, at the same time, the development of software and platforms

such as eBay, Amazon, AirBnB or Freelancer gives people an opportunity to be self-

employed but they are not required to register their companies, purchase expensive

equipment, hire employees, keep accounts and so on. So, in general digitalization gave

people more freedom in terms of opening and running their own companies, however,

the number of rivals and associated expenses keep many people away from being self-

employed. Digitalization along with other factors has an impact on the self-employment

rate, however, the degree of influence can be hardly perfectly measured.

2. Ranking of top companies 1990 – 2017

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Digitalization has also changed the ranking of top companies. The two tables below

compare the top 10 largest, most successful and fastest growing companies having huge

market capitalization in the US in 1990 and 2017.

Figure 3 – The 10 largest companies based on market capitalization, 1990 (in

billions of US dollars).

Source: ETF database, 2012. Link:

http://etfdb.com/history-of-the-s-and-p-500/#1990

Figure 4 – The 10 largest companies based on market capitalization, 2017 (in

billions of US dollars).

30
Source: Dogs of the Dow, 2017. Link:

http://dogsofthedow.com/largest-companies-by-market-cap.htm

The total market capitalization of the top 10 US companies in 1990 was about $438

billion dollars and companies were from the very different industries: oil and gas,

industrial goods, consumer goods, telecommunication, retail, healthcare. Today, the top

3 positions in the raking of the hugest US companies are the information technology

companies: Apple, Alphabet (Google) and Microsoft. Each of these giants itself has a

higher market capitalization comparing to the total one of top 10 US companies in

1990. And the number of the total market capitalization of top 10 US companies in

2017 is just enormous.

31
 3. Digitalization and low-skilled and high-skilled jobs

Digitalization has not only increased the positions of information technology companies

and created robust demand for technological jobs, but it also has reduced the demand

for routine and low-skilled jobs. Today, there is no need in the retail cashier. Due to the

rise of digital self-checkout options, the process of purchasing in grocery store can be

fully atomized. It is safe, fast and well monitored. For many years, the retail cashier was

one of the few options for little or no educated but enthusiastic people. The newspaper

deliveryman is an example of almost fully vanished jobs (except for example small

villages). There is no need to deliver newspapers if people can read news online just

simply by subscribing on the newspaper website. A travel agent is another example of

jobs that are now at the risks. Today it makes no sense when you can use google instead

and plan the trip by yourself. (Finance online). Taxi dispatcher job demand also

decreased. With the creation of apps such as Uber, Lyft, Easy Taxi, Yandex Taxi and

others, there is no more necessity in dispatchers as orders can be taken online. One

more profession that is in declining demand today is a postal-service worker.

Automated sorting systems, as well as high use of online and telecommunication

services, reduces the need for this job. (Finance online).

The list of professions in declining demand can be further continued: secretaries,

printing workers, bus drivers, accountants, credit analysts, telemarketers etc. Many

studies assume that the current technological change poses not only the risk of

significant demand decline and displacing by automation some specific types of jobs

but also could possibly lead to an overall structural unemployment (The Organization of

eastern Caribbean States, 2016). It was estimated that the risk of replacement exists not

only for routine tasks but for the cognitive as well as for example writing standard

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reports on stock market changes. Existing analytical tools in cooperation with

technologies can replace even such cognitive profession in the foreseen future (The

Organization of Eastern Caribbean States, 2016).

When analyzing the jobs being at risk of automation it is better to “analyze task content

of individuals jobs instead of the average task content of all jobs in each occupation”

(The Organization of Eastern Caribbean States, 2016). The results would be more

concrete and precise. The assumption that artificial intelligence along with technologies

can replace some jobs sounds reasonable and effective in the long-run, but despite that,

there are certain jobs that are unlikely to be ever atomized or at the very low risk of

being automated. These are the fields requiring jobs to be high-skilled. Arts and Media

is the first example. Creativity is the feature that cannot be atomized. Despite the fact

that digital art tools (like Photoshop) are of the extreme use for graphic designers,

camera advancement helps the photographs to take way better photos today and apps

(like Garageband or FL Studio) are indispensable for many musicians, art is a deep

expression of human creativity, it is something computers can not replace. Healthcare

and Medicine is another industry that unlikely will be fully replaced by machines and

better not to be. To some extend some task are already automated, however, there are

certain aspects such as dealing with human psychology, making fast and complicated

decisions over the actions or bedside manner. Besides, legal aspect is involved as the

question of whose is responsible for the actions of the medical robot would

automatically arise. (Lee, 2014). Politics and Law is one more industry hard to imagine

full automation for, as computers are not and should not be capable of writing laws,

being in charge of towns, cities or countries. Computers are not able to give a public

speech or make judicial decisions. Other example of industries that are not under the

33
risk of full automation (for the present moment) are quality assurance, education,

professional sports and management (especially c-level positions) (Lee, 2014). It is

impossible to claim to be one hundred percent sure that all the industries and jobs

mentioned above would not be automated within the time without having a chance to be

wrong one day. The speed and degree of technological development are incredible,

things that were hard to imagine 15 – 20 years ago are an integral part of people’s

everyday lives (cloud computing, bitcoin payment system, virtual reality, calls, real-

time online broadcasts etc). However, for the present moment and foreseen future

studies estimates no risk for these industries to be automated.

4. Digitalization and new jobs

Along with decreasing demand for routine, low-skilled jobs and cutting the number of

positions of this kind of jobs available, digitalization has created so many jobs that

people did not hear about before just 10 – 15 years ago at the very same time. There is a

suggestion that “65% of children entering primary school today will ultimately end up

working in completely new job types that do not yet exist” (Association of Southeast

Asian Nations, 2016, p.1).

The app developer is the first job on the list of occupation that did not exist 10 years ago

back to 2006. The iPhone was firstly launched on the market in 2007, Android followed

shortly after. Nowadays, almost half of the world’s adult population has a smartphone

and this has resulted in a huge demand for apps, so nowadays there is “a blooming

market for app developers” (Hallett, Hutt, 2016). Social Media Manager is another

profession that did not exist 10 years ago. By 2006 no platforms have yet been created

34
or did not get such a popularity for the Social Media Manager profession to be in

demand. Instagram was launched in 2010, Twitter was created in 2006, Facebook was

offered to the market for all world users (not only for the student of Harvard University)

in 2006. Today Facebook has more than 1.5 billion users worldwide. Online platforms

mentioned (alongside with other less popular platforms such as Russian Vkontakte,

Odnoklassniki, and others) became an inalienable part of the marketing strategy to

promote and popularize brands allowing them to efficiently reach and communicate

with customers. Cloud computing specialist is another very interesting example, as if

somebody said that they worked in the cloud, people would be confused. The term

“cloud computing” has emerged after Eric Schmidt (executive chairman of Alphabet)

described Google approach towards software as “cloud computing” (Hallett & Hutt,

2016). Just in 5 years, this job gained an incredible and hard to imagine growth of

1700% (Burke, 2017). Another job that did not exist 10 years ago which is now one of

the most important jobs is the SEO specialist. SEO specialist stands for Search Engine

Optimization specialist and the main aim of the job is to increase the search

optimization of the website and increase its position on the list of offered web sites in

search engines (Google, Yahoo, Yandex).

There are more examples of jobs created due to the digitalization such as Market

Research Data Miner, App designer, Blogger, Chief Listening officer, YouTube content

creator, Driverless car engineer, Drone operators, Uber driver etc. As it was already

mentioned, digitalization has either reduced demand for certain jobs (that are routine

and manual tasks jobs) or made some professions to disappear due to their uselessness

or the opportunity to replace the working force with technologies. However, tons of

statistics and many research show that all of the new jobs have emerged due to the

35
digitalization. All these newly emerged occupations require a certain set of skills to

perform the jobs successfully.

B. Hard and soft skills in-demand

It is not any kind of surprise that technologies “make certain forms of human labor

unnecessary of economically uncompetitive and create demand for new skills”

(Manyika, Chui, Bughin, Dobbs, Bisson & Marrs, 2013, p.15).

Digitalization has not only influenced the certain types of jobs to be in robust demand

and changed the ranking of companies by market capitalization and growth rated, it also

had an impact on hard and soft skills in-demand relevant for the labor market. Some

skills that were required to get a well-paid job are not needed today by companies.

Digitalization has created jobs (primarily in information technology industry) that did

not exist 20 years ago and these new jobs require employees with certain skills to

actually do the job. The chart below shows the impact of development and penetration

of technologies on the labor market.

Figure 5 – The impact of technologies on the labor market capitalization (2015 –

2025)

36
Source: World Economic Forum. Link:

http://reports.weforum.org/future-of-jobs-2016/skills-stability/

The figure shows that the impact of digitalization has not only not finished yet but is

currently developing and bringing more and more changes to the labor market. The

future development and penetration of Internet of things (IOT), advanced manufacturing

and 3D printing along with advanced robotics and autonomous transport would further

change industries and consequently, skills required. According to the Organization for

Economic Co-operation and Development (2015), the development of information and

communications technology industry (ICT) would lead to the increased demand for

some divisions of ICT skills such as ICT generic skills (ability to use information and

communication technologies on the daily basis such as using software and applications,

sending emails etc.), ICT specialist skills (such as ability to program software, develop

and design applications, ability to manage networks etc.) and ICT complementary skills

(social media marketing, communications on social networks, present brand products on

online platforms etc.).

37
The jobs in information technology industry cannot be performed by people who do not

have hard skills in that area. Only those people who have either a technical education or

took special technical programs can expect to be accepted for the position because most

of the businesses in the time of digitalization and digital economy adopt digital

technologies to catch up with the market and benefit from it to be productive and

innovative. So, in order to work properly with technologies, companies need “digitally

skilled employeeы for increasing productivity, sales, offering better services for the

clients and generating revenue” (The information and Communications Technology

Council, 2016, p.7).

Hard skills such as programming and application development, business intelligence

and analytics, web development, database administration, middleware and integration

software, social media management, cloud and distributing computing and many others

will significantly increase the employee chances to be hired as these hard skills are in a

solid demand today (Brooks, 2016). Many companies either offer training to gain

knowledge before fully performing the job or offer probation so that the potential

employee could demonstrate his competence and skills in case he would not have been

considered the perfect match for the position. Nevertheless, not having any background

in the area reduces the chances to find the job almost to zero. Important to say that not

only job-related skills are required by companies to be hired for the position. Only the

combination of hard and soft skills helps to successfully perform tasks. So, along with

the hard skills, employers seek for certain set of soft skills.

1. Top most and least in-demand soft skills

38
According to World Economic Forum (2016), there are top 10 most in-demand soft

skills that hiring managers are looking for in potential employees. First of all, the

potential employee is expected to be able to solve complex problems as well as be a

good communicator in order to coordinate well with others. People management and

critical thinking skills are of a great benefit for the candidates. Negotiation, quality

control and service orientation skills are one of the key skills needed. Judgment and fast

decision making skills along with active listening and creativity finish the list of top 10

skills that are considered important in today’s workforce. Also, World Economic Forum

(2016) made a report called “The Future of Jobs” asking chief human resources and

strategy officers to predict the top 10 skills that will be in the highest demand in 2020

labor market. The ranking of the soft skills was the following: Complex problem

solving (1st place), critical thinking (2nd place), creativity (3rd place), people

management, coordinating with others, emotional intelligence, judgment and decision

making, service orientation, negotiation and finally cognitive flexibility (World

Economic Forum, 2016). Two skills from 2015 list (quality control and active listening)

were replaced with emotional intelligence and cognitive flexibility whereas other skills

have changed their order on the list. So, for example in 2015 list creativity was on the

last place and 2020 list have lifted it up to the 3rd place. This can be explained by the

fact that despite the fact that thankfully to the digitalization many processes can be

automated and performed by software or machines much faster than it would have been

done by people, technologies cannot (yet) be as much creative as humans are. So,

employees would have to develop the creativity skill in order to catch up with the

market and benefit from digitalization. While creativity increased its position, certain

skills like negotiation and decision making skills dropped from the top, as machines

working with enormous quantities of data would be able to make complex weighted

39
decisions for people. Surely, the nature and degree of change would depend on many

factors such as country, speed of technological development and primarily industry

itself.

Also, LinkedIn (2016) announced 10 least in-demand soft skills such as business

planning, cross-functional team leadership, emotional intelligence, coaching, team

management, team building and others. These soft skills are more associated with

business leaders’ positions (management team, C-level positions) rather than with

middle-level jobs. However, this is a matter of statistics as there are relatively fewer

positions available for them comparing with entry and mid-level employees.

An interesting fact to mention is that soft skills are not so relevant and important for

information technology industry as to for example consumer services or retail. The top

3 industries where soft skills are most common are restaurants, consumer services and

professional training and coach (Berger, 2016). This is not any kind of surprise and can

be explained by the fact that these 3 industries (along with other seven on the list) imply

lots of communication, interaction and negotiation with customers, so the soft skills are

a must in these industries whereas the information technology industry positions tasks

are primarily concentrated on the technologies and their development (development of

mobile applications, data mining and analysis, cloud computing, web development etc)

rather than constant communication with clients.

However, not all the industries are experiencing such critical and perceptible shifts in

skills in-demand. It is estimated that certain industries are stable in terms of skills

stability for the period 2015 – 2020. For example, Media, Entertainment, and

40
Information industry is the top stable industry having only 27% of instability. The next

is Consumer services industry being 71% stable and Healthcare industry being stable on

71% (World Economic Forum, 2016, p.7).

C. Skill mismatch

Skill mismatch is one of the most significant problems existing on the labor market.

Skill mismatch is “the gap between the skills required on the job and those possessed by

individuals” (World Economic Forum, 2014, p.7). As skills are considered incredibly

valuable assets for individuals as well as companies in such a fast changing

environment, having for example substantially more skills than required for their jobs

does not allow individuals to reap benefits from their investments (such as time, money

or efforts) of their skills which could potentially be “higher wages, productivity growth,

and innovation” (World Economic Forum, 2014, p.7).

Different types of skill mismatch coexist such as skill shortage which is “demand for a

particular type of skill exceeds the supply of people with that skill at equilibrium rates

of pay”, qualification mismatch (“when the level of qualification and/or the field of

qualification is different from that required to perform the job adequately”), skill gap

(which occurs when the level of skills the employee has is different from those needed

to perform the job adequately), over or under-qualification (when level of qualification

either higher or lower than those required to perform he job adequately) and finally over

or under-skilling which happens “when the level of skills is higher or lower than

required to adequately perform the job” (World Economic Forum, 2014, p.7).

41
It is important to understand that perfect matching is not possible on the labor market

either as actors of the labor market make decisions “in a situation of imperfect

information and these decisions are influenced by a number of causes” (Rihova, 2016,

p.17). Perfect match is not only impossible to achieve but is in many cases undesirable,

but poor matching between skills supply and demand brings lots of negative

consequences with it both for individuals (employees) and the companies (employers)

and if reaches a great scale may even have an impact on the country’s economy as well

as society.

So, for individuals mismatch (over-skilling of over-qualification) could mean

“unrealized expectations, lower returns on investment in education, lower wages and

lower job satisfaction” (World Economic Forum, 2014. P.7). As for the companies,

mismatch can not only potentially decrease productivity but increase employees

turnover rate as well. At the macroeconomic level, skills mismatch can lead to the

strengthening of structural unemployment and may “reduce growth in gross domestic

product (GDP) through workforce underutilization and a reduction in productivity”

(World Economic Forum, 2014, p.7).

Along with mismatch skills problem, there are other problems on the labor market

related to the skills such as complexity to measure and forecast skills that would be in-

demand.

D. Contribution of governments and companies to education and skills

development

42
Governments and companies both understand the importance of skills in today’s

digitalized environment and the significance of existing problems with skills such as

skills mismatch existing on the labor market, so, they both take initiatives in order to

boost the development of needed skills.

Countries understand the importance of their expenditures to the education area as well

as the contribution to the development of skills. So, for example, Canada has announced

in 2016 that the government will launch Global Skills Strategy by mid – 2017 “to

facilitate faster access to top global talents with a committed two-week standard for

processing visas and work permits for global talent” (Bctech Association 2017). Also,

Canada is planning to invest $225 million over for years “to establish a new

organization that will work with willing provinces and territories, the private sector,

educational institutions, and not for-profit organizations to support skills development

and measurement” (Bctech Association 2017). Also, the government provided $73

million in 2016 to create the partnership between employees and post-secondary

institutions. The goal of the initiative is to create up to 8,700 new work-integrated

learning placements over the next four years. In 2017, the government continued to

invest “to provide work-integrated learning placements for post-secondary students and

graduates” (Bctech Association 2017).

Canada is only one of the many countries providing that kind of initiatives and spending

governmental budget investing in people’s education and skill development. More and

more countries understand the importance of the issue, so they increase government

expenditures on the education sector. So, for example for the period 2015 – 2016 UK

has spent 4.7% of GDP on education (Parliament, 2016). US, Scandinavia, France,

43
Germany, Australia tend to spend more on education comparing with India, Latin

America and some of CIS countries (Index Mundi).

Companies also understand the importance of their role, so they react to the issue as

well. The first thing many companies do is proving training and development programs

for their employees. Training is an “absolutely vital part of a company’s long-term

investment and growth strategy” (Gutierrez, 2016). Employees are businesses first and

primarily assets and successful companies with a clear vision understand that.

CyberCoders (a leading permanent placement recruiting firm) is one of these

companies. Associate Recruiter Incubator Program is one program offered to “educated,

highly driven, competitive individuals that teaches them to apply technology to a

diverse marketplace” (Thottam). CyberCoders understands that the competition for

talented employees is intense. The company believes that “equipping young

professionals with the tools they need to build their business development and recruiting

skills will lead to a long successful career”. SAS (on of market leader in business

analytics software and services) is another example of large companies that invest in

skills development of their employees. SAS offers emerging leadership programs for its

employees “for professional training and development” along with “career mentoring

and a career resource center” (Thottam). SAS also offers Academic programs having in-

class and on-the-job trainings for the recent graduates in sales and technical issues to

make sure they are well prepared for the full-time positions.

Companies provide the training for several reasons. First of all, providing trainings

increases employees’ productivity and as a result company’s productivity. Secondly,

investing in the employees reduces the employee turnover. People tend to stay longer in

44
the company and significantly contribute to the business. Also, trainings allow the

employees to be informed about all the business and economy trends. This becomes of a

critical importance in technological development time. So, employees acquiring new

skills that are vital to perform the job more efficient become of an absolute value for the

company and contributes to company’s growth and increase in productivity. One more

reason is that investing in young employees helps to grow real professionals out of

them, “young managers of today will become leaders tomorrow” (Lipman, 2012).

Thankfully to the development of technologies and digitalization of work environment,

tools helping to match individuals with right jobs have occurred as the reaction to the

issue of skills mismatch and high necessity to match right individuals with right jobs.

This tool is called online talent platforms. They are defined as “marketplaces that can

connect individuals to the right work opportunities. The sheer size of their user

networks expands the pool of possibilities, and their powerful search capabilities and

algorithms filter those possibilities in an efficient and personalized way” (McKinsey &

Company, 2015, p.1). These platforms help individuals to show their abilities, skills,

work experience and connect to the right network of people. Some platforms (such as

LinkedIn, Monster, Indeed, Careerbuilder and others) help to match job seekers and

employers offering traditional jobs. Users may use these platforms to create CVs online,

post full-time and part-time jobs, search for new talents to attract to the company or on

the contrary search for work opportunities. Other platforms (such as Amazon Home

Services, Uber or TaskRabbit) “connect individuals with contingent or freelance

projects or tasks and facilitate transactions by providing transparency on reputation and

ratings” (McKinsey & Company, 2015, p.4). So this kind of platforms matches

customers with workers who are available and ready to perform certain tasks or services

45
on one time or regular basis. Finally, the last type of platforms working is a talent

management. Digital tools of this platform allow to evaluate potential candidate skills,

attributes as well as “determine the best options for training and skill development”

(McKinsey & Company, 2015, p.4). Examples of these kind of platforms would be

PayScale, ReviewSnap, Pymetrics beta and so on.

For a pretty short period of time online talents platforms have already attracted millions

of users all over the world. The more these platforms grow in scale, “the faster and

more effective clearinghouses they become that can inject momentum and transparency

into job markets while drawing in new participants” (McKinsey & Company, 2015,

p.1).

McKinsey & Company (2015) predicts that online talent platform would be able to

significantly contribute to the economic growth and improve work outcomes for many

individuals all over the world as these platforms continue to attract more and more

participants. McKinsey & Company (2015) “assesses the potential of the online talent

platforms at several levels such as increase of the global GDP and employment rate,

reduction in spending on unemployment benefits and “misallocations in education

programs and long-term benefits such as enhanced innovation and creative destruction”

(McKinsey & Company, 2015, p.6).

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IV. Conclusion

According to World Economic Forum (2016), the world is on the threshold of the

Fourth Industrial revolution. Today, in an increasingly connected global environment,

“digital technologies have become significant drivers of productivity, innovation and

competitiveness in every sector of the world economy” (The information and

Communications Technology Council, 2016, p.7).

Artificial intelligence, Big Data analytics and clouds, 3D printing, Internet of Things

(IOT), robots and drones, social media and platforms to name just a few “are all

building on and amplifying one another” (World Economic forum, 2016, p.3).

The future of the labor market depends on several factors such as the competitiveness of

the national economy, demographic development, globalization and finally

technological changes (Walwei, 2016, p.2). Despite the fact that by today digital

technologies have already significantly developed and their impact is quite perceptible

on the labor market, the main impact of digitalization mostly remains uncertain and is

still ahead.

The impact of digitalization differs from the country to country and from sector to

sector, it is uneven. (Sabbagh, Friedrich, El-Darwiche, Singh, Koster, 2013, p.35).

Nevertheless, digitalization has already brought changes to the labor market. First of all,

digitalization has created many jobs that did not exist before, such as app developer,

social media manager or cloud computing specialist. Along with increasing the demand

for occupations in information technology industry (data scientist, data engineer,

marketing manager) requiring hard skills, digitalization has increased demand for other

47
professions such as registered nurse, lawyer, medical assistant or accountant because

despite the fact that technologies may be useful in performing tasks of these jobs, it is

impossible to fully automate them and there should always be a human to perform the

job well. Along with that digitalization has decreased demand for routine and low

skilled jobs.

Also, digitalization has changed the ranking of top companies by speed and intensity of

growth and market capitalization for the period 1990 – 2017. The total market

capitalization of top 10 largest companies in the US in 1990 was $438 billion which is

almost twice less than the market capitalization of the first company on 2017 list. By

2017 Apple had a market capitalization of $744 billion and each of the company on

2017 list had a higher market capitalization than any of 1990 list company.

Besides, development of technologies contributed significantly to rapid business

digitalization. Today, in order to be successful and competitive and catch up with the

market, businesses have to change the traditional approach towards business and

reconsider the entire long-term business strategy. The Big Data analytics became an

integral part of decision-making process; the businesses became custom-oriented.

As for the self-employment, there is no direct evidence of the impact of digitalization

on self-employment rate shifts. However, impact of digitalization can be examined from

two sides as on the one hand the entry cost is high and it is very expensive for the new

business to become competitive and catch up with the market but on the other hand the

development of platforms such as eBay or AirBnb gives self-employed people an

opportunity to earn money and do not pay those costs if they ran a business.

48
Along with that, digitalization has changed the demand for skills on the labor market.

Hard tech skills became of a big value on the market. Certain soft skills such as an

ability to solve complex problems or good communication skills outperformed soft

skills that were in-demand before such as team leadership, team management or

business planning.

Governments and corporations both realize the important of investment in education,

training, and development of skills for employees, so they constantly initiate certain

practices to do so.

For example, Canada has announced the government will launch Global Skills Strategy

by the middle of 2017 “to facilitate faster access to top global talent with a committed

two-week standard for processing visas and work permits for global talent” (Bctech

Association, 2017). Also, Canada would invest is the establishment if organizations to

support skills development. Canada is not the only example, as many other countries

have similar initiatives and increase their expenditure to the education. As for the

corporations, they tend to provide more training and development programs for their

employees. Also, thankfully to the digitalization, tools called online talent platforms

helping to connect right individuals with right working opportunities have occurred

such as LinkedIn, Monster or Indeed.

Digitalization is the process that touches every industry and almost every person in the

world. It is impossible to predict being fully confident future consequences of

49
digitalization. Nevertheless, based on statistics existing by today some trend can already

be observed.

50
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