Digital Economy

1. WHAT´S DIGITAL ECONOMY?

The Fourth Industrial Revolution, the Collaborative Economy, the Gig Economy, the
Economy 4.0, the Digital Economy... all these terms refer to the profound processes of
transformation that are changing our lives.
Digitalization is changing the Economy, our societies, our working and social conditions
and, even, our daily life. This huge transformation is not something that is going to
happen in the future. It's something that is happening right now.
There is still no consensus on the founding principles of the Digital Economy.
Nevertheless, there are some basic common points which are frequently mentioned in
all research studies.

a) The key role played by platforms.

This kind of digital tool allows three different actors to be connected creating a new
business model. These three actors are:
- The provider.
- The client.
- The platform, which works as the intermediator.
Depending on the role assumed by the platforms, the effects on working issues will be
different.

b) Robotization encompasses all the computerization and automation phenomena

that enable robots to carry out non-routine manual and cognitive tasks.
Robots may be either real (such as a smart factory, driverless cars, 3D printers...) or virtual
(such as software, algorithms, production process management and control systems,
artificial intelligence, etc.).

c) The importance of network effects and the use of big data.

Digitalized information has become a strategic resource. A new generation of digital
technologies are now generating unprecedented quantities of data and providing the
tools needed to harness the assets and leverage its value.
 d) The Digital Economy follows the principles of growing returns and zero or quasi-
zero marginal costs.
On the one hand, because of the positive network externalities. Networking produces
positive effects and the larger the network, the greater the returns.
On the other hand, increasing the network and producing more does not produce any
extra cost.

e) A newly emerging model industrial production (sometimes referred to as

"Industry 4.0") involves short production rounds of mass-customized goods.
The global fragmentation of value chains, the networking of productive capacities and
the blurring of boundaries between producers, sellers and consumers on the one hand
and the industry and the service sector on the other.

f) Profitability calculations for technological investments have been revolutionized

by a plunge in the cost of hardware and software paired with a leap in their
performance and productive efficiency.
Digital technologies are attracting (and producing) money.

VIDEO: THE FOURTH INDUSTRIAL REVOLUTION

The Fourth Industrial Revolution will bring change at a speed, scale and force unlike
anything we´ve experienced before. It will affect the very essence of our human
experience.
The First Industrial Revolution (1842) brought mechanical innovations like the steam
engine, cotton spinning and railroads.
The Second Industrial Revolution (1954) brought mass production through assembly
lines and electrification.
The Third Industrial Revolution Brough mainframe computers, personal computing and
the internet.
Today, radical system-wide innovation can happen in only few years.
The interplay between fields like nanotechnology, brain search,3D printing, mobile
networks and computing will create realities that were previously unthinkable.
Access to technology will spread like wildfire. Almost anyone will be able to invent new
products and services cheaply and quickly.
The business models of each and every industry will be transformed.
How do we avoid a world of joblessness, low productivity and inequality? By assuring
the Fourth Industrial Revolution really does improve the state of the world.
 2. PLATFORMS AND SHARING ECONOMY
Previously, we highlighted the Share Economy as one of the most important
characteristics of the Digital Economy.
The Collaborative Economy is, without a doubt, one of its main results. Accordingly, the
Collaborative Economy involves a "triangular relationship" in which three categories of
actors intervene:
- The service providers who share assets, resources, time and skills. These can be
private individuals offering services on an occasional basis ("peers") or service
providers acting in their professional capacity (these are "professional service
providers").

- Users of these services, as many as possible and wherever they are.

- The intermediaries that connect - via an online platform- providers with the users
and that facilitate transactions between them (these are "collaborative
platforms")
The collaborative economy can be carried out for profit or non for profit. The latter cases
are the most interesting ones- those concerning labor and social issues.
Platforms are an indispensable tool for the development of the collaborative economy.
There are two types of platforms:
As long as the collaborative platforms provide a service "normally provided for
remuneration at a distance, by electronic means and at the individual request of a
recipient of services", they provide an information society service and, consequently,
they are “Information Society Services Platforms” (ISP).
However, there may be cases in which platforms can be considered as offering other
services in addition to information society services. In certain circumstances, a platform
may also be a provider of the underlying service (for example, transport or short-term
rental service). These can be called "Integral Platforms" (IP).
Distinguishing a mere ISP from an IP is very important. The European Commission has
suggested the following key criteria:
i. Price → whether the price is set unilaterally or almost unilaterally by the
platform is a criterion of IP. On the other hand, ISP will only recommend the
price, or the underlying service provider will be free to adapt the price set by
a collaborative platform.

ii. Other key contractual terms → IP usually sets other terms and conditions
which determine the contractual relationship between the underlying service
provider and the user (for example, setting the mandatory instructions for the
provision of the underlying service). Otherwise, an ISP will be found.
 iii. Ownership of the key assets → IP owns the key assets used to provide the
underlying service, whereas ISP only owns the assets related to the
information society service (such as the software).

3. DIGITAL ECONOMY AND EMPLOYMENT CONDICITIONS

Previously, we learned to distinguish an Information Society Service Platform (ISP) from
an Integral Platform (IP).
We warned this distinction was going to have very important practical effects. One of
them is in reference to the employment relationship. From an Employment Law
perspective, it is not important what the parties call their relationship, but what this
relationship is in reality.
Despite the fact that the parties say they have an agreement between independent
contractors (the platform and the service provider), if there's an underlying employment
relationship, Employment Law must be applied.
The consequences of applying Employment Law are very significant:
i. The employer must respect all minimum standards set by employment law,
including collective bargaining agreements where appropriate. This includes
salary, maximum working time or rest periods, and holidays, among others.

ii. The employer must pay Social Security contributions and other kinds of
obligations set by Social Security Law and Tax Law. Despite the fact that these are
other areas of Law, different from Employment Law, the requirements are also
compulsory when an employment relationship exists.

iii. The employer must assume some possible liabilities derived from occupational
health and safety and has the obligation of preventing risk at the workplace.

But, how do we know that an employment relationship exists? Traditionally, the so-called
multiple test has been applied. This test is based on the following definition: "a worker is
a person who, for a certain period of time performs services for and under the direction
of another person in return for which he receives remuneration".
According to this, the multiple factors which determine the existence of an employment
relationship may be grouped under:
- Remuneration, wage is distinguished from price because it is a stable, periodical
and independent amount of money. Stable because it may have a variable part
and may be in cash or in kind. And independent, because it may not be set by the
service provider- the employee-, but by the employer or by agreement.
 - Dependence, it exists if the main conditions are set by the employer (the
platform) including salary, working time, clients, working tools, etc.

- The rise of platforms has introduced a new set of factors, those related to finally
provision of the underlying service: an employment relationship will exist, when
the platform owns the key assets used to provide the underlying service. The
existence of an integral platform is clear additional evidence for proving then an
employment relationship exists.

4. MAPPING THE MAIN SOCIAL RISKS.

The Digitalization of the Economy is producing new social risks in many different areas:
- EMPLOYMENT
This is probably the impact which appears most frequently in the media. According to
the World Economic Forum, between 2015 and 2020, about five million jobs will be
destroyed due to digitalization. Both skilled and non-skilled jobs are at risk.

- FRAGMENTATION OF THE LEVEL MARKET

Platforms have brought a new player into the labor markets: the "crowd" available
24/7 all or almost all over the globe and prepared to work at often very low rates.
This has serious consequences on workers ‘collective action, representation and
working conditions.

- WORKING CONDITIONS
It seems that less work for more people will mean poorer working conditions. This is
the obvious result if the law of supply and demand is applied. But there are other
factors which move in the same direction: the already mentioned fragmentation of
the work force, the weakening of workers ‘collective action and representation and
the new forms of human resources management.
 - HEALTH AND SAFETY
The digitalization has brought about a business model based on 24/7 availability. This
has clear consequences on working time and work-life balance: the borders between
professional activity and personal life are blurring. But the intensification of work and
the new types of activity and risks are going to produce new forms of occupational
hazards and diseases, including more frequent and new psychological risks.

- MANAGEMENT
Digitalization is also a challenge for business management. It is necessary to learn
how to deal with the digital surveillance within, the limits of the law and human rights;
or how to manage data protection and new forms of intellectual property rights, or
how to find the right balance between users´ evaluation and the internal assessment.

But these new social risks may be seen as new challenges for society:
- We should pay attention to unemployment and rising inequalities. New forms of
social protection such as the basic income and now at the core of the global
debate.

- Deregulation or, simply, lack of regulations. It is necessary to regulate these new

activities in all areas and, especially, for employment and labor law. In this respect,
some traditional regulatory tools will be used adopting some changes.
Nevertheless, in other cases new legal solutions should be delivered.

- Tax erosion and social protection funding. The lack of regulation affects taxation
and social security. It is necessary, to find new ways, to make these global
activities, contribute to the functioning of the States and social protection
systems.

- Growing social polarization, because the only way to avoid growing social
inequalities is solving the problems already mentioned: guaranteeing minimum
working conditions and contributing to a welfare state.