HuseynliBahmanandAndHuseynliNigar (2022) - DIGITALISATION AND TRANSFORMATION IN LABOUR

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Digitalisation and Transformation in Labour Market
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Bahman HUSEYNLI33; Nigar HUSEYNLI34
DIGITALISATION AND TRANSFORMATION IN LABOUR MARKET
İŞGÜCÜ PİYASALARINDA DİJİTALİZASYON VE DÖNÜŞÜM
ABSTRACT
Employees or the workforce that provides the services needed by employers meet in the labour market,
which is where labour supply and demand meet. The labour market, like all other domains, is being affected
by the digital transformation. The application of labour relations on digital platforms begins with the
establishment of the digital labour market. Making full use of new technical possibilities to generate value
and competitive advantage is what digital transformation is all about. The goal of this research is to examine,
define, and describe the effect of digitalization on the labour market, as well as the potential impact of digital
technologies on the labour market. The study included qualitative research methodologies. First, a literature
study was conducted, after which the data was scrutinized using a systematic methodology and then analysed
using the inductive technique. As a result of the article, it became clear that the digital transformation has
had a significant impact on the labour market, and there are expectations that this impact will continue. Thus,
the new digital labour markets claim to be flexible, lean and economical for both customers and independent
contractors.
Keywords: digital labour, digital labour market, labour digitalisation.
JEL Codes: J01, E24, F66.
ÖZ
İşçiler veya işverenlerin ihtiyaç duyduğu hizmetleri sağlayan işgücü, işgücü arz ve talebinin buluştuğu
işgücü piyasasında buluşmaktadır. Diğer tüm alanlar gibi işgücü piyasası da dijital dönüşümden etkileniyor.
Çalışma ilişkilerinin dijital platformlarda uygulanması, dijital işgücü piyasasının kurulmasıyla başlamaktadır.
Değer ve rekabet avantajı yaratmak için yeni teknik olanaklardan tam olarak yararlanmak, dijital dönüşümün
konusu. Bu araştırmanın amacı, dijitalleşmenin işgücü piyasası üzerindeki etkisinin yanı sıra dijital
teknolojilerin işgücü piyasası üzerindeki potansiyel etkisini incelemek, tanımlamak ve betimlemektir. Çalışma
nitel araştırma metodolojilerini içermektedir. Önce literatür çalışması yapılmış, ardından veriler sistematik bir
metodoloji kullanılarak incelenmiş ve ardından tümevarım tekniği kullanılarak analiz edilmiştir. Yazının
sonucunda dijital dönüşümün işgücü piyasası üzerinde önemli bir etkisi olduğu ve bu etkinin devam edeceğine
dair beklentiler olduğu ortaya çıktı. Böylece, yeni dijital işgücü piyasaları hem müşteriler hem de bağımsız
yükleniciler için esnek, yalın ve ekonomik olduğunu iddia ediyor.
Anahtar Kelimeler: dijital emek, dijital işgücü piyasası, işgücü dijitalleşmesi.
JEL Kodları: J01, E24, F66.
33
Lecturer, Azerbaijan State University of Economics (UNEC); E-mail: bahman.huseynli@unec.edu.az, Orcid No: 0000-
0001-8139-3712
34
Lecturer, Azerbaijan State University of Economics (UNEC); E-mail: n.guliyeva@unec.edu.az, Orcid No: 0000-0001-
7817-6485
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INTRODUCTION
The widespread use of emerging digital technologies such as ICT and data analytics, robots, artificial
intelligence, and the Internet of Things is causing a digital “transformation”. This digitization of the economy,
also known as the Fourth Industrial Revolution, is transforming the corporate environment by redefining the
limits of production, consumption, and distribution (Guidi, 2021). Emerging are new procedures, products,
and methods that better suit the demands of businesses or customers. Consequently, technological
advancements may raise long-term value and productivity in both the manufacturing and service industries,
as well as improve working conditions and quality of life.
Digitization has changed every aspect of our daily lives in the last decade. Technological devices have
become a part of our daily lives, and individuals without a smartphone are almost nonexistent. Various objects
such as shopping, along with most products and services, are digitized. Digitization can be seen in many
sectors such as finance, education, health, sports, communication, transportation and retail. While no one
disputes that digital media technologies have radically changed every aspect of life, their impact is never too
great to be fully measured or evaluated.
Given the comprehensive changes, it is important to understand what “digitalization” means. Because
based on this, it is possible to analyze the economic and power relations between digital technologies
themselves, as well as within and through them. The term “digital” refers not only to digital machines and
processes, but to the entire political, social and economic context and infrastructure in which they arise.
Another important issue is the “transformation” process. One of the topics affected by digitalization,
technology and transformation is “labour”. Labour can no longer be seen only as a factor in industrial relations,
or as a subject of interest peculiar only to political economists; it should also be understood as a larger category
to analyze many different aspects of daily life. With the impact of digitalization on labour, a new concept,
“digital labour”, has emerged. The main purpose of this study is to explore the concept of “digital labour”.
This study has been done from this point of view.
The digital transformation will have large effects on the labour market. Previous studies mostly reveal
that half of all current jobs are susceptible to automation in the next 10 to 20 years. These studies use
assessments by technology experts on the future automation probabilities of occupations (Dengler & Matthes,
2018).
The task-based approach of Autor et al. (2003), explaining increasing wage and employment inequality
with changed occupational tasks, serves as our theoretical starting point. Since routine tasks more than non-
routine tasks are increasingly replaced by programmable machines, the wage and employment development
of medium-skilled employees performing rather routine tasks lags behind that of high- and low-skilled
employees (Autor et al., 2003; Autor et al., 2008; Acemoglu and Autor, 2011; Autor, 2013). Empirical studies
reveal such a wage and employment polarisation for many industrialised countries (Lemieux, 2006; Goos and
Manning, 2007; Goos et al., 2014). In Germany, a polarisation of employment is observable since the 1990s
(Spitz-Oener, 2006; Dustmann et al., 2009). Thus far, a polarisation of wages through changed tasks has not
been found (Antoncyzk et al., 2009).
Methodology
The systematic approach technique, which is one of the qualitative research approaches, was employed
in this exploratory investigation. The purpose of this study is to analyse, define, and characterize the impact
of digitalization on the labour market, as well as the prospective influence of digital technologies on the labour
market. Consequently, qualitative research approaches were utilized in the work. In other words, a literature
analysis was conducted on the topic, these publications were thoroughly scrutinized, and the sections
pertaining to the influence of digitalization on labour markets were collated and systematically analysed
individually. This research also explores the theoretical elements of topics such as digital labour, the digital
labour market, the influence of digitalization and transformation on the labour market, and digital labour and
the digital labour market. As part of our examination of the present status, we utilized secondary research,
which comprised of data gathering and processing techniques, followed by an analysis and synthesis of the
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resulting data. Publications by foreign writers and research reports from international organizations and
governments are the primary sources for the secondary research conducted. In addition, the induction approach
was utilized in the study, based on previous research.
Labour and labour market

The labour market is a place where supply and demand for work meet with employees or the workforce
that provides the services required by employers. This process is already taking place in the digital
environment. That is why it is called the “digital labour market”. An employee can be anyone who wants to
offer their services for compensation, and an employer can be a single institution or organization that has an
individual need to do a particular job or perform an assignment. In the economy, the labour market is driven
by supply and demand for labour. In this market, labour demand is the firm's demand for labour, and supply
is the supply of labour. Labour supply and demand in the market are affected by changes in the ability to
bargain.
Digitalisation and transformation in labour market

Digital transformation is about making full use of new technological possibilities to create value and
competitive advantage. For customers, this is manifested mainly in advanced or completely new products and
services. This transformation often has a profound impact on the business model, operating model,
organizational structure and core resources of the organization. Digital transformation should support this
transformation by evaluating and reengineering the enterprise's value creation and value capture mechanisms.
Innovation and agile development require a completely different approach from traditional application
development (Korhonen & Halén, 2017).
The new digital labour markets claim to be flexible, lean, and cost-efficient, for both their clients and
their independent contractors. And cloud work, crowd work and gig work do indeed offer more and more
people an attractive alternative to conventional full-time employment, a self-determined way of working –
when, where, how, for whom and on whatever they want. However, this new flexibility often goes hand in
hand with precarious working conditions and undermines hard-won legal and social standards of good work
(Woodcock, 2018).
Thomas Friedman (Friedman, 2005) famously pointed to a globalized world that would allow for “the
sharing of knowledge and work – in real time, without regard to geography, distance, or, in the near future,
even language.” But, as much as some firms and clients might want it to, a planetary market doesn’t do away
with geography; it rather exists to take advantage of it. Platforms use uneven geographies to facilitate labour
arbitrage, cross-border competition, and are able to foster what Peck (2017) refers to as an “offshore
consciousness”. To be clear, references to local labour markets, national labour markets, and planetary labour
markets should never be made to ignore the myriad ways that those labour markets are brought into being by
multi-scalar exogenous factors which, in turn, lead them to be socially and spatially segmented and
fragmented. The spatial and scalar prefixes (urban-, local-, national- etc.) that we add to labour markets instead
are intended to signify enablers and constraints that serve to cluster coming-togethers of employers and
workers within particular economic geographies. These enablers and constraints can be technological barriers
(e.g. transportation costs and the availability of broadband), political (e.g. the availability of visas and work
permits), social (e.g. availability of skills and language fluencies), economic (e.g. local reserve wages) and
spatial (e.g. work and workers that inherently have to be in particular places) (Graham, & Anwar, 2019).
The McKinsey Global Institute Report (2017) emphasizes five main factors affecting the pace and
extent of automation: technical feasibility, the costs (for both hardware and software) that are involved in
developing and using the technologies required for automation; the supply, demand, and costs of human
labour; economic benefits other than lower labour costs, including productivity, quality and safety gains and
regulatory and social acceptance.
More than half (64%, in EU-28, and 62%, in EU-15) of “digitalized workers” in the EU assessed their
skills related to the use of computers, software or applications at work as adequate for their duties, while 11-
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12% admitted that they needed further training to cope well with the duties relating to the use of computers,
software or applications at work. In Romania, only 59% of “digitalized workers” consider that their skills
correspond well to the “digital” duties, a percentage under those recorded at the level of both the whole EU
and the Visegrad countries. As a consequence, a higher share of Romanian “digitalized workers” (19% against
11% (EU-28), 2% (Czechia), 4% (Slovakia), 5% (Bulgaria)) consider that they need further training to cope
well with the duties relating to the use of computers, software or applications at work. As regards the
involvement of “digitalized workers” in choosing, modifying or testing the software or computerised
equipment used at work among the EU Member States, there were larger differences, in 2018. Thus, the
highest share of “digitalized workers” who were involved in choosing, modifying or testing the software or
computerised equipment used at work was recorded in Luxembourg (32%), Finland and Austria (both 31%),
Denmark and the Netherlands (both 26%). At the other end of the scale, Cyprus (7%), Czechia (8%) Bulgaria
(9%), Slovakia (both 10%) had the lowest share. The Romanian “digitalized workers” reported a lower
involvement in choosing, modifying or testing the software or computerised equipment used at work (14%)
compared with EU-28 average, but higher than in the case of Slovakia, Bulgaria and Czechia (Herman, 2020).
The impact on digitalization on labour

It is essential, while analysing the consequences of technological breakthroughs on labour markets, to
comprehend how these new technologies interact with economic, social, and cultural equilibriums. For
instance, the rise of automation in the production systems of developing nations, where cheap labour is
concentrated, causes the dilemma of giving up the benefit of low wages on the one hand, and the possibility
of achieving large productivity increases on the other. Increasing capital and production mobility with the
globalizing economy with the Third Industrial Revolution, industrially developed countries shifting their
production activities to developing countries, particularly China, to reduce their costs by benefiting from cheap
labour force, provides developing countries with the opportunity to create a significant source of income with
cheap labour markets. With the Fourth Industrial Revolution, however, the increased use of inexpensive and
easily accessible technologies in a vast array of business processes and the extensive automation of production
processes may reduce the attractiveness of cheap labour in developing countries in terms of productivity gains
and rapid investment returns. Therefore, the loss of cheap labour cost advantages in emerging nations may
produce employment and economic balance issues in these nations. In order for developing countries to
maintain their income capacities through labour markets, they should integrate technological transformation,
create new education models, and develop stable economic growth competencies, thereby geographically
owning the high-skilled labour supply that can fill the new job areas created by digital transformation (Karaçay
& Alpkan, 2019).
In this regard, it is beneficial to examine China's digitization objectives. Although China's automation
and development objectives are similar to Germany's Industry 4.0 vision, they are founded on a national
strategy. The State Council of China announced its national strategic objective with the title "Made in China
2025" in May 2015. This strategy plan's guiding concepts are presented under the following headings: I
Developing industrial capacity with an emphasis on innovation-driven production; ii) Optimizing the structure
of the industry; iii) Placing a premium on quality over quantity; iv) Developing and recruiting talent; v) green
production and the environment. China's new growth model and new strategic objective are to demonstrate
that it is no longer the country with the lowest cost labour market and to assume a new place in the global
economy with quality and branded innovative products (Karaçay & Alpkan, 2019).
The dynamics of the labour market is a very complex field dependent on many factors affecting the
results, which makes it difficult to accurately determine causality and forecasting the consequences. However,
in expert opinions on which tasks, jobs and industries will be most affected by automation, there is a general
consensus that it must be necessary to equip current and future employees with skills allowing them to benefit
from higher qualifications (and better paid ones) that result from automation, including robotics. At the same
time, a clearer picture of low-skilled employment opportunities that will be created indirectly through
technology-based innovation should be used to enable low-skilled workers who, for whatever reason, are
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unable to upgrade their skills to move to other sectors (IFR, 2017). The task of equipping current and future
generations of employees with the opportunity to use the possibilities of automation rests both on the
government and private sectors. The government must provide policies, incentives and programs to increase
and retrain the workforce. Meanwhile, the private sector must invest more in skills training. The challenges
of the modern era of globalisation, together with the fourth industrial revolution, create many opportunities
and threats. Production automation, the digital revolution, robotisation, machine learning and further
technological advances have a significant impact on the labour market and demand for digital competences,
and digital skills (Czaja & Urbaniec, 2019).
The industry is moving to adopt holistic business models, completely redesign products and services,
and build closer interactions with suppliers and long-term partnerships with customers. Digital transformation
is about adopting disruptive technologies to increase productivity, value creation and social well-being. Digital
transformation is predicted to have high annual growth and rapid penetration. Digital transformation affects
all sectors of society, especially economies. However, society is facing radical change due to the development
of digital technologies and their extensive application in all markets (Ebert, Duarte, 2016). In addition to the
increased attention from customers, organizations face even tougher competition due to globalization
(Westerman, Calméjane, Bonnet, Ferraris, & McAfee, 2011) and to survive and gain competitive advantages
(Bharadwaj, 2000), pushing digitalization before others.
Arntz et al. (2016) and Arntz et al. (2017) calculate in a second step the employment consequences
arising from a task-based approach, based on the assumption that only activities, and not professions, may be
replaced by computers. They employ PIAAC data and an econometric model to relate Frey and Osborne's
(2017) automation probability to specific tasks. Assuming that the technologies in Germany and the United
States have the same effect on the automation probability of occupations, they discover that in the United
States, 9 percent of occupations have task profiles with a high automation probability, while this is true for 12
percent of German occupations. In our assessment, however, the task structures of occupations with a high
chance of automation and those with a low risk of automation change only somewhat, likely due to the
imprecise assignment of automation probabilities to the two-digit ISCO codes. In addition, the mere recoding
of American jobs to ISCO has significant compatibility issues.
Dengler and Matthes (2018) demonstrate that when we assume that whole occupations are replaceable,
we find comparable results to those of prior research: in 2013, around 47 percent of German employees worked
in a replaceable occupation. Assuming that just particular duties may be substituted, only 15% of German
employees are at danger, according to the authors.
Globalisation and technology give rise to changes in labour markets. New technologies replace people
as part of routine tasks, eliminating some tasks and changing the scope of work of others. Global competition
shifts production around the world, destroying jobs in one region while creating them elsewhere. These
changes affect new forms of work and skills. At present, a decline is only expected for manual workers. These
employees are chiefly employed in agricultural and industrial professions. On the other hand, with regard to
intellectual and social tasks, a general increase in significance is expected, namely the increase in the
importance of: (1) business skills, (2) selling and persuasion skills, and (3) serving and attending skills. The
first two types of skills are interrelated because they are highly commercial in nature, while the anticipated
increase in service and participation skills may be related to care tasks (Eurofund, 2019).
According to the World Economic Forum’s Future of Jobs Report 2020, by 2025, widespread
workplace automation linked to technological development will entail a reduction of approximately 85 million
jobs, +10 million compared to the amount estimated in a previous edition of the report. At the same time, up
to 97 million new roles (-36 million compared to the 2018 report), better able to capture the new division of
labour between humans and machines, may be created. However, at a country level, there are diverging views
around the digital revolution’s impact on future job creation/destruction dynamics. For instance, scholars
estimate the share of US jobs that are at risk of automation range between 9% and 47%. Meanwhile, in similar
studies applied to EU members states the gap is even wider: between 7% and 60%. In addition, the extent to
which activities can be automated is also widely debated. Current estimates show that only between 1% and
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9% of jobs could be automated by demonstrated technologies. Ample evidence can instead be found for the
progressive change in the quality of labour demanded of jobs. Employment is shifting away from tasks with
a higher routine content. By 2025, repetitive and mundane activities will decline from 15.4% of the workforce
to 9%. In light of the higher routine intensity of lower-skilled jobs, this skilled-biased technological change
may have important distributional implications, resulting in growing polarisation of the labour market. Almost
half of all the new jobs created by the digital transformation will require high skills. Consequently, about 40%
of lower-educated workers will face the risk of having their job automated, compared to the 5% of workers
with a tertiary degree facing the same threat. The wider use of technology will lead to a higher request for
digital, technology-related skills and non-cognitive ones such as communication, creativity, and critical
thinking. Demand for roles such as robotics engineers, artificial intelligent specialists, and digital marketing
specialists will gradually increase at the expense of jobs such as assembly and factory workers, executive
secretaries, accountants, and auditors.
The future of the labour market is and will be substantially affected by the digital transformation. The
qualification levels of the population and in particular, the structure of digital literacy of employees will be
essential for the competitiveness and sustainability of any economy (Astafurova, Zapryagaylo, & Kulagina,
2019). On this regard, the ability of territories to endow citizens with opportunities for training and upskilling
will be critical. The same is true for the provision of conditions of ease and access to digital resources and the
corresponding competence mastery. Overall, the recent foresight exercises and research results highlight the
striking importance of the expansion of automation in production and distribution processes, and this will lead
to radical shifts in the demand for workers (Rogulenko, Ponomareva, & Krishtaleva, 2019).
Conclusion
The ability of governments, economies, and organizations to develop competitive advantage is
predicated on their ability to adapt to change as a consequence of globalization and technological
breakthroughs. Most sectors are undergoing significant changes as a result of new methods of doing business,
new business models, and more automation brought on by recent advancements in digital technology. While
this shift in production systems alters the macro dynamics of global labor markets, it also alters the scope and
substance of job skills that employees in the labor market should possess on a micro level. This new era, which
began with the Fourth Industrial Revolution, necessitates the use of information technology at all levels by all
employees, even those in low-skilled occupations. New employment with diverse forms and content will
develop as industry and company dynamics change, necessitating the ability to operate in increasingly
complex operational and organizational frameworks (Karaçay & Alpkan, 2019).
The role of skills as a geopolitical instrument is further reinforced by technological progress and
digitalization. As a result, skills shortages in the local labor market and the inability to attract the necessary
personnel are two of the most significant impediments to new technology adoption. As a result, countries with
strong educational and labor systems may gain the most benefits from the digital transition while minimizing
its negative consequences (Guidi, 2021).
Digital labour supply and digital labour demand are key elements shaping the digital labour market.
The formation of the digital labour market is the essence of the implementation of labour relations on digital
platforms. However, although the regulation of digital labour and digital labour relations, the finding of
employees in the digital labour market and all these issues are not fully resolved, the digital labour market is
already operating in different parts of the world, albeit in its original version. While a brief look at all of this,
there is a need for in-depth study of relevant topics.
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HuseynliBahmanandAndHuseynliNigar (2022) - DIGITALISATION AND TRANSFORMATION IN LABOUR

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Digitalisation and Transformation in Labour Market

Article · August 2022

Bahman Huseynli Nigar Huseynli

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Labour and labour market

Digitalisation and transformation in labour market

The impact on digitalization on labour

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