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118 WORLD DEVELOPMENT REPORT 2016 US$500 per user, or US$150 billion for the 300 million users. 96 In Estonia, digital signatures saved 20 minutes per signature. 97 In Europe and the United States, consumers are willing to pay an average of US$50 a month for services that they now get for free on the internet. 98 Large consumer surpluses have also been estimated for Brazil, China, and Mexico. 99 The rapid adoption of digital technologies, despite the costs, speaks for itself. In developing countries, 5 percent of consumption goes into ICT, ranging from 2.8 percent in the poorest households to 6.6 percent in the richest. In Africa, in addition to covering the cost of the hardware, the median phone owner spends more than 6 percent of his or her monthly income on mobile phones for calls and SMSs. The share is over 13 percent when accounting for people who own a mobile phone but do not work (mostly youth and spouses). 100 Benefits to consumers, while significant, also come with risks. There are concerns about loss of privacy (chapter 4); information overload, as more and more information—some relevant and some not—is at our fingertips; and “overconnectivity,” since people are constantly online and reachable. The line between leisure and work is blurring. Digital technologies make leisure time more enjoyable and less costly, but also make workers more productive and allow them to work away from the office. More than one-third of internet users in the United States report working longer hours because of technology, despite also feeling more productive. 101 Labor market polarization can lead to greater inequality For workers, digital technologies generate new opportunities for employment and earnings, but also risks. One major risk is related to the speed of labor market changes and the destruction of jobs. Nonstandard forms of work and shorter job tenures are likely to become more common, especially among youth. Internet access has been associated with more job-to-job flows, within the same firm and across employers. 102 Large-scale automation can also accelerate job destruction, especially in developed countries. In addition to factory automation, there is automation of logistics and processing, digitization (data entry, publishing/printing), and self-service (document creation and management versus clerical support, or retail self-checkout). 103 These changes are good for aggregate productivity, as discussed in chapter 1, but can create challenges for individuals in the transition to new jobs. This is especially the case when the skill needs of new jobs are different from those of the old jobs. Beyond skill-upgrading, the challenge is to ensure that labor regulations facilitate and do not impede these transitions, and that social protection systems support workers when they are between jobs or not working regularly. A second risk relates to the changing nature of work and the quality of internet-enabled jobs, such as microwork or jobs in the on-demand economy. These new forms of work provide workers and firms with flexibility and improve efficiency in the use of resources, but also come with a possible erosion of workers’ bargaining power and a lack of benefits, such as unemployment and health insurance or severance pay. In most cases, workers are considered independent contractors rather than employees. In a world where a job in a firm has been a pathway out of poverty because firms help share risks and provide capital, training, and technology, 104 higher nonwage employment and this “new informality” may not be desirable. In developing countries, most work does not have these benefits, but especially in advanced countries, a balance is needed between efficiency and protection to avoid a “race to the bottom” in terms of workers’ protections. Already, some microwork platforms and companies in the sharing economy provide insurance to workers and collect taxes, but these new developments in the labor market raise questions about traditional approaches for protecting workers. As discussed in chapter 5, this will probably require reforms not only in the new industries but also in the traditional ones to ensure that all workers—irrespective of their type of work contract—have basic protections. Perhaps the biggest risk from technological change, however, is that of widening income inequality. Although technologies are becoming widespread, the economic payoffs are not. The poor almost exclusively use only mobile phones not connected to the internet. And even if they had access to the internet, they lack the skills to use it productively, with many still unable to read in the first place. Positive impacts from using digital technologies—as with other technologies in the past century—are most likely to be captured by those already better off. In the United States, the adoption of advanced internet applications by firms led to substantial wage growth in the 6 percent of counties that were the wealthiest, the most educated, and had an IT-intensive industry, with no effect elsewhere. Technology explains more than half the difference in wage growth between already welloff counties and others. 105
EXPANDING OPPORTUNITIES 119 The risk of rising inequality is evident in the declining shares of (routine) labor in national income, and the “polarization” of the labor market—that is, the declining employment in middle-skilled occupations relative to those in low- and high-skilled ones, and the heightened competition for low-skilled jobs. The concern is that the ladder to the middle class is pulled away as middle-skilled jobs disappear or are fundamentally transformed by digital technologies. Declining shares of labor in national income Various factors, including technology, are shifting the distribution of income within countries away from routine labor and toward nonroutine labor and capital. 106 In the past few decades, and especially after 2000, the share of national income going to workers has fallen steadily in developed and many developing countries, driven by a falling share of income going to workers performing mostly routine tasks that follow exact, well-defined procedures that can be easily automated (figures 2.12 and 2.13). In the United States, at the technological frontier, the share of income going to routine labor has fallen from 38 to 23 percent since the late 1960s, with a simultaneous rise in the nonroutine labor share from 24 to 34 percent. In Honduras and Romania, in the 2000s, the income share of nonroutine labor increased from 28 to 32 and from 21 to 25 percent, respectively, with declines in the share of routine labor. 107 Where the labor share has fallen most, inequality has risen most (figure 2.14). A growing literature also links recent technological change to widening inequality. 108 Figure 2.12 United States: Labor share in national income is falling, driven by routine labor Share of routine and nonroutine labor in total income Income share (%) 45 40 35 30 25 20 15 10 5 0 1968 1973 1978 1983 Routine labor 1988 1993 1998 2003 2008 Nonroutine labor Source: Eden and Gaggl 2014, for the WDR 2016. Data at http://bit.do /WDR2016-Fig2_12. 2013 Figure 2.13 Labor shares in national income are falling in many countries, including some developing countries Trends in labor shares in output since 1975 percentage points every 10 years Poland Mexico Hungary Estonia Bahrain Slovenia Lithuania South Africa Norway Luxembourg Micronesia, Fed. Sts. Namibia Latvia New Zealand China Finland Tunisia Argentina Slovak Republic Germany Austria Sweden France Italy Australia Taiwan, China Canada Japan Denmark Switzerland United States Netherlands Belgium Czech Republic Spain Singapore United Kingdom Portugal Bolivia Turkey Armenia Colombia Kenya Thailand Costa Rica Iceland Belarus Moldova Korea, Rep. Ukraine Brazil –15 –10 –5 0 5 10 Change in labor shares Source: Karabarbounis and Neiman 2013. Data at http://bit.do /WDR2016-Fig2_13.
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Public Disclosure Authorized 102725
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A World Bank Group Flagship Report
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Contents xiii xv xix Foreword Ackno
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CONTENTS vii Boxes O.1 5 Frequently
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CONTENTS ix O.24 35 Digital safegua
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CONTENTS xi B3.8.1 178 Autocratic g
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Foreword We find ourselves in the m
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Acknowledgments This Report was pre
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ACKNOWLEDGMENTS xvii Karl Chua, Mas
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xx ABBREVIATIONS GDP GIS GNI GPS GS
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xxii ABBREVIATIONS BFA Burkina Faso
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Inclusion Efficiency Innovation
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OVERVIEW 3 Figure O.1 Digital techn
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OVERVIEW 5 Box O.1 Frequently asked
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OVERVIEW 7 Map O.1 The internet is
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OVERVIEW 9 Figure O.6 The digital d
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OVERVIEW 11 This mechanism operates
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OVERVIEW 13 Figure O.10 The size of
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OVERVIEW 15 Box O.3 Bridging the di
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OVERVIEW 17 sector is thus challeng
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OVERVIEW 19 skills that help them b
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OVERVIEW 21 Figure O.15 Labor share
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OVERVIEW 23 Figure O.18 From a tech
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OVERVIEW 25 governments and citizen
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OVERVIEW 27 Box O.6 Nailing Jell-O
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OVERVIEW 29 as well as higher secur
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OVERVIEW 31 Figure O.22 Policy prio
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OVERVIEW 33 Figure O.23 The types o
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OVERVIEW 35 Box O.12 Can continuous
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OVERVIEW 37 Box O.13 European Union
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OVERVIEW 39 29. Data for 2014 of ne
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OVERVIEW 41 OECD (Organisation for
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HOW THE INTERNET PROMOTES DEVELOPME
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ACCELERATING GROWTH 51 varies with
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ACCELERATING GROWTH 53 Map 1.1 Many
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ACCELERATING GROWTH 55 Figure 1.6 L
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ACCELERATING GROWTH 57 Figure 1.7 I
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ACCELERATING GROWTH 59 Box 1.3 Is t
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ACCELERATING GROWTH 61 Map 1.2 Chin
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ACCELERATING GROWTH 63 Box 1.5 The
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ACCELERATING GROWTH 65 is selling c
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e-HEALTH 191 Figure F3.1 Sequencing
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4. Sectoral policies 5. National pr
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SECTORAL POLICIES 201 Box 4.1 Polic
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SECTORAL POLICIES 205 is independen
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SECTORAL POLICIES 207 Box 4.3 Fragi
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SECTORAL POLICIES 209 role for the
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SECTORAL POLICIES 211 subscriptions
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SECTORAL POLICIES 213 Box 4.5 The l
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SECTORAL POLICIES 215 Box 4.6 Guate
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SECTORAL POLICIES 217 Figure 4.1 Pr
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SECTORAL POLICIES 219 Box 4.7 How b
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SECTORAL POLICIES 221 mandating tha
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SECTORAL POLICIES 223 the internet
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SECTORAL POLICIES 225 Protecting pe
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SECTORAL POLICIES 227 grown since t
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SECTORAL POLICIES 229 Box 4.9 Tech
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SECTORAL POLICIES 231 Box 4.10 Isra
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SECTORAL POLICIES 233 US$74 million
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SECTORAL POLICIES 235 has been clas
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SECTORAL POLICIES 237 Kende, Michae
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242 WORLD DEVELOPMENT REPORT 2016 i
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THE DATA REVOLUTION 245 Figure S5.1
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THE DATA REVOLUTION 247 A journalis
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NATIONAL PRIORITIES 249 • Rising
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NATIONAL PRIORITIES 251 schools, ho
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NATIONAL PRIORITIES 253 Figure 5.3
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NATIONAL PRIORITIES 255 requiring f
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NATIONAL PRIORITIES 257 around the
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NATIONAL PRIORITIES 261 Box 5.3 The
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NATIONAL PRIORITIES 263 Box 5.5 Kha
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NATIONAL PRIORITIES 265 Box 5.7 Eme
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NATIONAL PRIORITIES 267 Box 5.8 Bui
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NATIONAL PRIORITIES 269 Box 5.9 Bui
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NATIONAL PRIORITIES 271 • Explore
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NATIONAL PRIORITIES 275 identify gh
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NATIONAL PRIORITIES 277 Table 5.7 T
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NATIONAL PRIORITIES 279 Box 5.13 Es
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NATIONAL PRIORITIES 281 experiences
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NATIONAL PRIORITIES 283 dence.” N
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NATIONAL PRIORITIES 285 Kremer, Mic
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CHAPTER 6 Global cooperation Data,
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ENVIRONMENTAL MANAGEMENT 323 Map F6
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