Digital innovation and transformation drive what has been called the Fourth Industrial Revolution or Industry 4.0. This digital transformation of all industry sectors will revolutionise the structure and governance of markets and lead to a significant reconfiguration of work and employment.
On the one hand, integrating digital innovations in business strategies is an essential means of creating value. Further, the digital transformation allows deep connection of systems creating seamless digitalised value chains with increased efficiency. On the other hand, there may be pressure on social cohesion, since only certain social groups and/or regions and/or countries will benefit while others are left behind. Also, the distribution of the newly created value may be uneven, for example via the potential erosion of the tax base due to fewer taxable jobs, or due to the fact that digital platforms and transactions risk to be elusive to taxation. Thus, the digital transformation of the industry puts serious challenges to the European economies and social welfare models. In order to support an informed debate on how to address these challenges, scenarios have been developed reflecting different labour and taxation policy options, and analysing the impact on economic growth, jobs and social cohesion of Europe’s economies and societies.
Four extreme scenarios have been investigated: utopian, ultrasocial, dystopian, and ultra-liberal, for which the analysis shows that policy measures can be designed for a future in between the extremes of ultra-social and ultra-liberal. A smart combination of elements from both, together with policy measures in other areas (competition and consumer protection law, measures influencing labour cost, data sharing regulation, public procurement, industrial policy and other incentives) may eventually lead to a solution that can bring Europe’s social, economic and strategic autonomy interests together.
Political cohesion in the EU is essential for the realisation of such a scenario having the right balance to sustain economic growth and social cohesion within Europe during the digital transformation of the industry. EU level consensus should especially be created regarding a strong policy stimulating European industry platform development and take up; flanked by policies regarding data sharing and competition regulation. Only in that way Europe can avoid being pushed to some extreme scenarios where specific European economic and social interests risk to be marginalised.
In the context of its activities in its strategic innovation area of Digital industry, EIT Digital decided to launch a study focusing on the main policy challenges emanating from the digital transformation of the European industry. The study followed a scenario-based approach to structure and assess the potential impacts of policy measures with a main focus on taxation and labor market regulation. Digital Enlightenment Forum was contracted to execute the study under the guidance of EIT Digital senior staff.
We acknowledge the contributions of the Digital Enlightenment Forum for providing the breadth and depth of this study via interdisciplinary stakeholder discussions as well as an extensive literature survey. A special thanks to Jacques Bus, George Metakides, and Paul Timmers of the Digital Enlightenment Forum and Cristiano Codagnone of the University degli Studi di Milano for their support in managing and creating the in-depth study.