Yet in theory, the digital economy could make geography less important, and in some cases it has. For example, a recent story in the Financial Times featured a self-employed worker based in Dharavi — a slum in Mumbai — making around $20,000 annually selling goods through eBay.
An important feature of the digital economy is that it allows even people in deprived areas to reach global markets, as even more traditional goods have become increasingly mobile. Etsy provides such an example, allowing local artisans to reach customers all over the world through its online platform. In addition to around 750 workers employed in the company’s Brooklyn office, some 1 million self-employed artisan sellers have emerged worldwide.91 These entrepreneurs all take advantage of the opportunities provided by the digital economy, offering their crafts to the global market.
At the same time, e-entrepreneurship typically requires less capital investment, while online platforms for crowdfunding make capital more accessible. In other words, digital technologies have made self-employment an option to a growing share of workers. This is reflected by the emergence of the “app economy”, which has grown substantially since Apple launched its app store in 2008. According to a recent estimate the app economy today provides work for more than 750,000 Americans.9293
Yet, while self-employment has been on the rise since the turn of the century, its causes remain unclear. In Britain, the number of people in self-employment has increased by more than 30% since 2000, with the result that one in seven is self- employed.94 In America, the rise of self-employment has been even more substantial, growing by nearly 50% over the same period.
89
Anderson et al. (2014); Gobillon, Selod and Zenou (2007).
90
Moretti and Chang-Tai Hsieh (2014).
91
The Economist (2014a).
92
Progressive Policy Institute (2013).
93
Citi’s Internet analyst estimates the “App Economy” grew 45% in 2014 to reach $29 billion and could grow to $52.5 billion by 2017. Native apps, as opposed to web browsers, have become the primary means of consumption on mobile devices. Mobile apps make money from paid downloads, app marketing, app commerce and app advertising. Both Google and Apple share 70% of gross booking with app developers. While gaming apps and Facebook consume much of the time spent on apps today, productivity apps are growing quickly, suggesting a broadening of the use case for mobile phone apps.
94
Dellot (2014).
In some cases the digital economy can make geography less important as entrepreneurs can offer goods to a global market
Disentangling the reasons behind the surge in self-employment is difficult due to the limitations of the data. For example, some people do not report income from self- employment, while others just do it on the side in addition to having a full-time job. Nevertheless, some evidence on the underlying drivers of self-employment exists. To be sure, unemployment is a part of the story. A recent study found a close link between the unemployment rate in a given American locality and the rate of new business startups.95 Similarly, according to a recent survey of Britain by the Royal Society of Arts and Populus, 27% of those who started up in the recessionary period of the last five years did so to escape unemployment. Yet, the largest increase in self-employment since 2008 has been in professional occupations, consisting mainly of relatively skilled workers.
The growing skills gap may thus be another reason, causing employers to rely increasingly on contractors. Indeed, as digital technology becomes more heavily integrated in the daily operations of firms across a wide range of industries, digital literacy will become crucial for the vast majority of workers. Yet, according to the European Commission, some 47% of European workers have insufficient digital skills; 23% have none at all.96
At the same time, self-employment is becoming more socially acceptable and thus increasingly a preference. In Britain, 84% reported that self-employment made them more content with their work. In another survey by the Resolution Foundation, 73% of respondents said their move into self-employment partially or largely reflected personal preference, although a growing minority indicated they had gone self- employed because of a lack of alternative options.97
The idea that workers should expect to stay with the same employer until retirement seems somewhat dated. While the recent surge in self-employment is clearly associated with unemployment, this is only one side of the story. The digital economy is making self-employment more attractive for skilled entrepreneurs, but also provides opportunities for less skilled workers in deprived areas:
Freelancer.com and Elance-oDesk already connect 3.7 million businesses with 9.3 million workers. As the economy is becoming increasingly digitised, self-
employment may even become the new normal.
95 Fairlie (2013) 96 European Commission (2013). 97 Resolution Foundation (2014).
Self-employment is on the rise since the turn of the century, but the reason for the rise is unclear
Self-employed workers are happier with their working lives
5. Digital Transformation: Risks and
Opportunities
Like every technological revolution, the digital transformation entails risks and opportunities. By understanding the associated challenges, the risks can be mitigated, and by taking advantage of the opportunities, the benefits of digitisation can be maximised. This chapter seeks to shed some light on the digital transformation ahead in terms of related risks and opportunities.