Digital Transformation of European Industry (EIT Digital 2023)
In Europe, as in the rest of the world, digital innovation and transformation foreshadow the coming of what has been called the Fourth Industrial Revolution. The concept of Industry 4.0 has emerged to describe this digital transformation in industry in all sectors. Integrating digital innovations in their business strategies is an essential means of creating value and digital integration and connection of systems may create seamless digitalised value chains.
The objective of this study is to present policy options for the use of taxation and labour market intervention in view of emerging developments in industrial digital platforms, AI and related technologies, and analyse how these options may impact economic growth and social cohesion, as well as the development of Industry 4.0 in Europe.
It is operationalised by considering taxation and labour regulation instruments in terms of their effects on economy, society and politics. Despite extensive discussions on the impact of AI and robots on the workplace and labour market, there is little systematic evidence. Recent estimates on the effects of automation on jobs show strong variations on potential job losses of between 9% up to 40-60% of current jobs by 2030.
The prevalent view is that automation both substitutes and complements human work. But also that traditional full time labour contracts look set to be further replaced by other forms of employment like temporary jobs, freelance work, mini jobs, smalls job intermediated by digital labour platforms etc.
In brief, from the policy perspective, the report highlights the following points:
- Dependent on the political consensus achieved, a balanced combination of elements from both scenarios can be constructed, creating a labourfriendly environment with technical and social innovation, leading to economic growth and social cohesion.
- Political consensus could be created by including other measures in addition, for example a strong industrial policy based on investments stimulating European platform development and take up, or new data sharing and competition regulation.
- Political cohesion internal in the EU is essential to achieve the right balance for Industry 4.0 to produce economic growth and social cohesion with European solutions. InvestEU, Horizon Europe, Digital Europe, and related deployment, capabilities and cohesion programmes in discussion, can support this process.
- It could be considered to pursue a coalition of labour market decision-makers and innovation/technology policy-makers in Europe to find such balance. EU unity is necessary to manage the global forces in capital and technology, for example through the OECD.
- If Europe would be pushed to the extreme point of the Ultra-liberal scenario, it is likely that European Industry 4.0 platforms will be marginalised.
- A balanced transformation can be funded by higher growth, a common higher but selective approach to taxation and if needed, temporary budget deficits.
