Digitalisation and a new way of working

Since March, the way in which work is performed is changing throughout Europe, with remote working increasing across the continent. Many large multinationals, headquartered in Ireland, the Netherlands or Luxembourg, are implementing plans to allow their employees (usually highly skilled people with high incomes) to work from where they choose. Many have decided to return to their country of origin, close to family and friends, and far away from the chaos and smog of big cities.

It is a social, logistical and fiscal revolution we are not quite ready for. This pandemic, which hit Earth like an asteroid, had the effect of showing the cracks which are already present, both in the digital environment and in the way we work. Despite technological progress, which should guarantee greater comfort and free time for people, there has often been an increase in the number of hours worked. Two major factors are impacting the changes we have experienced in both our working lives and our free time: digitalisation and the new way of working.

Digitalisation

As anticipated, Covid-19 has highlighted some problems, including the lack of technological infrastructures that impact on work, student life and also on workers’ free time. For example, in Italy, 17 million people do not have access to the internet at home. 6 million do not have any type of internet access (not even mobile). Taking Europe as a whole, there are around 50 million people without access to the internet at home. Furthermore, in the 16-74 age bracket, it is estimated that about 52% of Italian residents use the computer only once a day, compared to the European average of 64%.

Nowadays, technology allows us to carry out a wide range of activities, but these activities are hindered by a lack of functioning infrastructure. This is clear with regard to distance learning. On average, 9% of students in OECD (the Organisation for Economic Co-operation and Development) countries do not have a quiet place in their home to study.

In addition to the place for studying, students need a computer. In OECD countries, the availability of devices fluctuates between 34%, in Indonesia, and 95% in many European countries. Finally, to interact with the rest of the class and with the teachers, it is necessary to have a sufficiently stable internet connection.Fortunately, in many OECD countries, the internet is stable in over 90% of cases.

As you may imagine, from the workers’ perspective, the numbers are similar. Taking Italy as an example, 74.7% of families who have a broadband connection. However, information technology (IT) infrastructure unevenly reaches municipalities of different demographic profiles: in metropolitan areas, the rates of access to broadband reach 78.1%, while in municipalities of two thousand inhabitants or fewer, this share drops to 68.0%. Moreover, about 30% of families living in rural areas have a connection speed not exceeding 30 megabits per second (Mbps), usually not suitable for ensuring the fluid use of advanced processes and applications. Regional data, on the other hand, shows an advantage in central and northern Italy. (cfr. ISTAT, Cittadini e ICT. Anno 2019)

On the one hand, the outbreak of Covid-19 highlighted the lack of infrastructures, but, on the other hand, it gave a significant boost to the digital world. One need only think about the fact that, after Covid-19, 24% of bank customers believe they no longer need to go to the bank branch, instead choosing to access through purely digital means, such as apps or sites. Moreover, analysts' forecasts were used to predict that in the US market, 24% of companies would have e-commerce by the end of 2024, largely due to the fact that during the outbreak, the percentage of companies that did use e-commerce rose from 17% to 33% over the space of just two months.

Like technological progress, the technological skills of workers must also increase. This, in my opinion, is a problem that is neglected today. In the working world, artificial intelligence and robotics are making great strides (The artificial intelligence market will reach a valuation of $77.6 billion in 2022). Today, in 70% of companies, new technologies are becoming commonplace, while the most advanced ones are being experimented on through small scale practices that will then be extended to the whole business.

We are therefore in a situation in which workers will change the way they work: the majority of repetitive work will be replaced by activities of greater value, through the analysis and interpretation of results. Taking the administrative world as an example, let's ask ourselves about the issues with receiving an invoice. This invoice must be checked, registered in the system for accounting purposes, and then paid. After this, the invoices received will be analyzed to see the cost trend. While there are many steps to simply logging the invoice, little time is devoted to the production of reports with the analysis of the results. Thanks to modern technologies, both the data collection and the insertion into the system can be automated and the number of corrections due to manual errors will be lower. Therefore, much more time is saved to analyze the reports produced and to be able to make strategic decisions.

The non-mechanical nature of analysis means that it requires more in-depth education combined with the ability to use technological tools. It is therefore evident that, in the population, there are imbalances in analysis skills and in the use of technology. To solve the problem, different strategies must be implemented according to the situation of the worker. We could, for example, divide the working population into three groups:

The first group is represented by the “workers of tomorrow”. For them, technology is not just an independent subject. Today, coding represents what the study of English was for the generation born in the ‘80s and ‘90s in non-English speaking countries. It will be a fundamental skill in every area and a sine qua non for accessing the job market. It is therefore necessary to review school programs and classes, not only at university level, but also at secondary and even primary school level. The jobs market also demands this change. According to the World Economic Forum, in the next 3 years, the evolution of the way of working globally - accelerated by technology and automation - will lead to the birth of 133 million new job opportunities, compared to 75 million jobs that are destined to disappear. In addition, the gap between the skills necessary to acquire these jobs and the level of education offered by schools on these topics is large. Skill mismatch negatively impacts both workers and companies, slowing the growth of the entire country-system. In the information and communications technology (ICT) sector, for example, the gap between skills demand and supply is currently 18%.

The second group is made up of “today's workers”: those who are about to enter the job market and those who have been working for a while. The common factor is elasticity and the willingness to change. For these workers, it is essential to provide for upskilling activities, i.e. to find a way to integrate or increase their skills. To date, most companies prefer to learn by doing, but it would be desirable to create a partnership between the private and public spheres, to give these workers the chance to take courses on frontier technologies applied to a given sector.

The third group are “yesterday’s workers”: by this we mean retirees, people about to retire and also those who are reluctant to change. For these people, work is either not an issue (in the case of retirees) or it risks being a problem, as the investment required for training courses may not justify the residual working time. For these workers, one should think of welfare activities, such as an inclusive income, rather than alternative pension instruments. One could also think of using these resources to carry out training (not technological, but based on their experience) and staff supervision.

A new way of working

One of the most common new phrases we have been hearing since the beginning of the pandemic has been “smart working”. By this we mean the ability to work anywhere without going to the office.

While, in one way, the benefits are many (reduction of commute times, personal comfort, flexibility in time management, more time with family etc.) there are some critical issues at the economic level and at the microeconomic level (which concerns the single individual). The implications for taxation, contributions and applicable law are enormous and the current legal instruments have not been designed for this situation.

Where does a person who works with an Irish company, but works a significant percentage of his time in another European country (or several European countries) pay taxes and contributions? And which laws apply, the employment law of the country of performance or that of the country of the employer?

Private International Law and some European regulations and directives give some initial indications which risk making a process that could be straightforward, very complicated and uncertain. The Commission and the European Parliament should urgently take action on this point to standardize the legislation within the community without creating arbitrage.

And what of the implications for the individual?

From the off, some have viewed remote working through a pessimist’s lens. As possibility became a necessity, they had to submit to smart working. And with good reason, as companies reported an increase of up to 21% profitability and a 40% drop in quality defects. Furthermore, it has been shown that productivity can increase up to + 20% in conjunction with a decrease in absenteeism.

Furthermore, it seems that Covid-19 has accelerated many processes already underway in the digital revolution which now appears unavoidable and badly needed. However, many pitfalls remain. The problems we are facing are many, they vary in character and they all need political solutions which, as always, will leave some unsatisfied.

Here are some issues that need addressing:

  • Smart working is effective if you have adequate working space in your home, otherwise it raises problems, given the growing number of calls and video conferences, and the space needed for roommates/family members to live together in comfort.

  • Limited human interaction can exacerbate loneliness. Having less interaction also decreases the indirect knowledge that occurs in the office and the time needed to contact colleagues lengthens.

  • The lack of assembly in the workplace makes union organization even more complex (if not impossible) and limits the defense of workers' rights. This issue already constitutes an emergency.

  • The cost of rent, internet connection and management tools will disappear from the balance sheets of companies and, at least for now, they will burn holes in the pockets of workers.

  • The protection of workplace safety will be essentially entrusted to the worker, freeing companies from even more responsibilities.

  • The housing market in large cities could quickly collapse, creating chains of bankruptcy and unemployment in the tertiary and construction sectors. We must find a way to manage the process, ensuring that we are avoiding jolts.

  • If companies realize that it is possible to make people work remotely, the territorial competition will expand exponentially and some companies will prefer to hire non-nationals, who cost much less, speak more languages ​​and may work harder and better. Once this process has started, it will be difficult to stop.

  • We need to rethink the ways of tracking the hours worked and the management of breaks and holidays.

Conclusion

Today, we find ourselves in a rapidly changing situation. This is, of course, partially down to a need (recovery from Covid-19), but also in part due to the pace of technological evolution. In my view, the invisible hand risks failure or, at least, having a very important ethical and social cost, in terms of jobs and quality of life.

Therefore, at the European level as an absolute minimum, we need an institution that can: facilitate private investments, even with joint ventures and partnerships, to strengthen and extend infrastructure everywhere; adapt education programs to the existing technological context, which is in constant evolution; think about new pension and subsistence methods; and clearly legislate and regulate smart working from both a legal and fiscal point of view, avoiding arbitrage on labor costs and taxation within the European Community.

Covid is, unfortunately, here to stay, which means that smart working is now a permanent fixture in many of our lives. We need strong governance that can stay ahead of the digitalisation of the working world, if we are to adapt to this new situation without sacrificing the rights of workers.