Impact of digital transformation on the labor market:

Why is digitization,Information of Technologies (IoT), Industrial Revolution 4 or however we call it so special? In the last 25 years, we witnessed rapid technological progress and digitalization –  looking at the labor market, we have more employed people in Germany than at any other given moment. How does that fit? Therefore, the question is whether the simple story of digitization destroying jobs is not the whole story. The economic system is quite flexible and able to deal with many kinds of shocks. Looking into the future, of course it depends and what kind of fundamental new technologies emerge. What we will see is an increase in productivity. One might even see a scenario where people might have the opportunity to reduce their working time. That's one way on how so far our societies have dealt with strong productivity increases of industrial revolutions in the past. Why can`t we have a situation where we only work 30 hours per week in 20 years and let the machines do the rest? Why don`t we think about a sabbatical every four years for all employees, so that we have time to learn new things and create a new framework for the concept of lifelong learning?

Bitcoin, blockchain, distributed ledger technology

Cryptocurrency is picking up the principles of the model of currency competition developed by Hayek many decades ago - the interesting fact is that people are willing to give real money in exchange for private money which is in general nothing but an IOU. Distributed Ledger technology (DLT) has the advantage that the person having created the system is no longer seen - this is an important initial psychological factor. As soon as people trust in the system, they are willing to pay money and so it is a kind of transformation of something completely worthless into something people have trust in. We will further discuss the future of cryptocurrencies. As governments have the opportunity to intervene within the system, it is questionable if the cryptocurrencies that we see today will be the currencies of the future. But for sure, digitalization will change the financial system and in this context peer to peer lending could be a form of money exchange that might challenge the traditional role of banks. Think about digital platforms collecting money from people who want to save money on one side and distributing it to people who need money to buy a house for instance on the other side and the process of monitoring the borrowers and diversifying the funds. Consequently, you might no longer need to have your deposit with a traditional bank as it might be possible to open short-term deposits at the central banks for everyone. This trend could fundamentally challenge the role of banks as lenders and therefore is a hot research topic at the chair of Prof. Dr. Peter Bofinger.

 

Check out #13 Episode of the “WUEconomics – outside the box – Podcast” for more details and insights.