The economy and digitalization – opportunities and challenges

What is the effect of digitalization on jobs and the economy? And what are the obstacles that stand in the way of benefitting from digitalization? While new jobs are created all the time, there is a risk of increasing tension in the labor markets. Countries with dual labor markets and strong protection for insiders as well as high taxes on labor are no exception in this regard. Indeed, the Nordic labor market model may be up for its most significant challenge yet. There is a risk that new jobs and services may grow too slowly and that skill developments may lag behind. Moreover, job automation and transfer of tasks to the cloud will put increasing pressures on a tax base in large part based on labor income.
Many OECD-countries have experienced shrinking middle classes with increased polarization, partly driven by technology. But here is nothing inevitable how well European welfare states cope with digitalization; the outcomes will depend on the choices of political institutions. Policy options that promote both growth and yet manage to smooth welfare developments are discussed.