Introduction
Digital technology is reshaping our world in all its aspects. Many see it as the key to innovative and effective solutions for our chronic problems. One of the most important of these problems is poverty. The inclusion of poverty eradication at the forefront of the seventeen goals in the United Nations 2030 Agenda for Sustainable Development reflects the international community’s awareness of the importance of this pressing issue.
This paper seeks to discuss the impact of digital technology on poverty and the unequal distribution of income and wealth. It clarifies that this impact is broader and more complex than it seems and is not necessarily positive in all circumstances and times. The paper also emphasizes that policies related to the development and use of digital technology play a crucial role in determining the extent of this technology’s positive impact.
The paper aims to provide a balanced picture of the positive and negative aspects of digital technology’s impact on poverty and income distribution. It also addresses the importance of the context of the development and use of this technology, including comprehensive economic and social policies, not just policies for the use of the technology itself.
The paper emphasizes that digital technology operates within the framework of society and its existing relationships and does not recreate them from scratch. Therefore, using digital technology in the context of unjust economic and social relations tends to increase the negative effects of these relations and cannot reverse or reduce this effect alone. However, it can be a powerful tool for positive change when integrated with comprehensive poverty eradication and social justice policies.
Poverty and Economic and Social Rights
According to the United Nations’ definition, “Poverty encompasses more than the mere lack of income or productive resources to ensure sustainable livelihoods. Its manifestations include hunger, malnutrition, limited access to education and other basic services, social discrimination and exclusion, as well as lack of participation in decision-making.” This definition reflects the link between poverty and access to the material, moral, and social resources necessary for a decent life.
The United Nations’ definition of poverty encompasses several economic and social rights, which are included under one term: poverty. Article 11, paragraph 1, of the International Covenant on Economic, Social and Cultural Rights (ICESCR) obliges States to protect “the right of everyone to an adequate standard of living for himself and his family, including adequate food, clothing and housing, and to the continuous improvement of living conditions.”
The second paragraph of the same article stipulates the right to be free from hunger. This paragraph also refers to the measures to fulfill this right, including “improving methods of production, conservation, and distribution of food by making full use of technical and scientific knowledge.”
Given that the poverty index relies on average daily income per capita, there is a close link between poverty and efforts to combat it, as well as the right to work, which Article 6 of the ICESCR obliges state parties to protect. The ICESCR also includes details regarding workers’ rights and social security rights in Articles 7, 9, and 10.
Therefore, considering eradicating poverty as a main goal in the United Nations 2030 Agenda for Sustainable Development does not add to the existing international obligations under the ICESCR except for setting a time frame for fulfilling the minimum of these obligations.
This paper focuses on the impact of digital technology on poverty and the unequal distribution of income and wealth. However, it should be emphasized that the concept of poverty relates to the extent to which states succeed or fail in fulfilling their obligations to protect their citizens’ economic and social rights under the ICESCR and other international, regional, and domestic agreements. Thus, what this paper discusses is fundamentally related to the impact of digital technology on several key economic and social rights.
Digital Technology, Poverty, and Unjust Distribution of Income and Wealth
Poverty and income inequality are shaped by a complex web of interconnected factors. While increasing average income is crucial for poverty reduction, lowering the cost of essential needs like food, shelter, education, and healthcare is equally vital.
Some policies that countries can adopt, such as imposing progressive taxes and using their proceeds to provide free or subsidized services to low-income people, have a decisive impact on addressing income inequality and reducing poverty. Reducing the cost of providing basic services, primarily education and healthcare, helps low- and middle-income countries provide these services to the largest possible number of low-income individuals. This practically means that large numbers of people will surpass the poverty line, even if their average income is numerically below this line.
When studying the impact of digital technology on poverty and income inequality, it is necessary to consider how it affects all the factors influencing these issues, not just its impact on economic growth and raising average income. This includes its impact on the cost of providing basic needs and the efficiency of providing key services such as education and healthcare.
Digital technology is characterized by its ability to deeply intervene in individuals’ daily lives, and therefore, its impact goes beyond macroeconomic and social indicators. It directly affects individuals’ practice of their daily activities, their access to resources, services, information, and knowledge, and their ability to take advantage of available opportunities to improve their living conditions.
Digital Technology and Poverty Eradication
Numerous studies confirm that digital technology has a clear impact on reducing poverty rates. Digital technology achieves this impact through several channels, the most important of which are indirect channels. This includes the impact of digital technology on the macro economy, growth rates, and job creation, which is reflected in raising the average per capita income.
On the other hand, there are many channels through which digital technology can directly affect poverty reduction. Digital technology can reduce the cost of basic goods and services and increase their efficiency. However, in order to maximize the positive contribution of digital technology to poverty eradication efforts, a number of conditions must be met.
Indirect Impact of the Evolution of Digital Technology on Limiting Poverty
Multiple studies have documented the positive influence of digital technology on economic growth rates, enhancing production efficiency and contributing to overall economic development. These studies encompass both advanced economies like those in the European Union and developing nations such as Nigeria.
Pushing Economic Growth
Digital technology plays a central role in driving economic growth through various avenues. Firstly, its evolution has spurred the creation of new and diverse industries, encompassing the production of digital devices and equipment, as well as the provision of essential services like internet access and cloud computing.
These industries have experienced rapid expansion in recent decades, fueled by the growing demand for digital technology applications across different sectors. Consequently, this growth stimulates the expansion of all supporting industries that supply raw materials, components, energy, and other necessary utilities to the digital technology sector.
Secondly, digital transformation, which involves integrating digital technology into all industries’ operations, contributes to increased growth rates, productivity gains, and, in some instances, reduced production costs. This transformation fosters efficiency and innovation across various economic sectors, ultimately contributing to economic growth.
Economic growth positively impacts poverty rates by increasing per capita GDP and raising average incomes. Additionally, economic growth leads to higher government revenues through increased tax collection, enabling greater spending on essential services. This enhanced capacity allows the state to provide these services to its citizens, particularly benefiting low-income groups and those in rural and remote areas who often have limited access.
Creating Job Opportunities
Economic growth inherently generates more job opportunities. Consequently, digital technology’s contribution to economic growth also positively impacts the labor market and the availability of jobs. Moreover, digital technology creates new and unconventional avenues for employment and income generation.
The software industry enables small and even micro-sized entities to operate and compete in a market that values creativity and skills. E-commerce platforms empower individuals and small groups to engage in low-cost, low-barrier production and craftsmanship, selling their products directly to consumers.
Furthermore, cross-border communication and the platform economy facilitate freelance work for people with diverse skills and expertise. The content creation market, particularly on social media, has also flourished in recent years. This highly flexible market welcomes content creators from all backgrounds, regardless of formal qualifications or technical skills.
Potentials of Direct Use of Digital Technology in Fighting Poverty
Beyond its indirect impact on poverty reduction through macroeconomic improvements, digital technology can also be directly leveraged in poverty eradication efforts. This involves strategically utilizing digital technology to address factors directly contributing to poverty. Such applications include reducing the cost of basic resources, enhancing the provision of crucial services, and offering learning and training opportunities that empower individuals with limited incomes to secure higher-paying jobs and improve their livelihoods.
Lowering Cost of Basic Resources
Digital technology can be leveraged to enhance and streamline the production of essential resources like food and shelter. By optimizing agricultural planning, irrigation systems, and the entire supply chain from harvest to distribution, digital technology can reduce the final cost of food, making it more accessible to consumers. It also boosts production, increasing food availability and further lowering prices.
Similarly, integrating digital technology into construction and building processes can accelerate housing production and decrease costs, enabling more people to afford decent housing.
Under favorable conditions, with other factors remaining stable or improving, the application of digital technology in producing basic goods can significantly eradicate poverty, as the high cost of these necessities is a major barrier for millions living below the poverty line.
Improving Basic Services
Basic services, particularly education and healthcare, and access to basic goods are crucial for a decent life. Reducing costs within traditional models or offering more affordable alternatives has significant potential to improve these services and their accessibility.
This impacts individuals’ ability to access services based on their income. It also affects governments’ capacity to fulfill their human rights obligations by providing at least a minimum level of these services for free.
Digital technology can enhance service delivery efficiency and offer innovative access solutions. Prominent examples include remote education and healthcare services, which were previously impossible without digital technology. These alternatives are cost-effective and overcome barriers of distance and resource disparities between urban and rural areas. Thus, digital solutions help address service gaps in hard-to-reach regions.
Requirements for Digital Technology to Have a Positive Impact on Poverty Eradication
To harness digital technology’s potential for poverty reduction, it must be deployed within a holistic framework where multiple factors work in synergy. Several conditions can lead to the opposite effect, where digital technology development and use inadvertently worsen poverty.
In poorer and developing nations, where most of those below the poverty line live, the focus should be on creating an enabling environment for the successful adoption of digital technology. This primarily involves establishing adequate infrastructure to support its use and ensuring equitable access for all citizens.
Furthermore, innovative education and training programs can disseminate awareness and knowledge, empowering a larger segment of the population to utilize digital technology to improve their lives. These programs should particularly target the poorest communities, which lack the resources to acquire digital skills independently.
A clear strategy for leveraging digital technology in poverty eradication is crucial for poor and developing countries. Investing limited resources in digital technology without prioritizing poverty reduction as a core objective can lead to resource wastage and exacerbate poverty instead of alleviating it.
Can Digital Technology Exacerbate Poverty?
There’s a common belief that technological advancement inherently improves human lives, but this isn’t universally true. Technological development isn’t inherently good or evil; its creation, development, and spread are social processes influenced by various factors, leading to positive and negative consequences that can evolve over time. These factors include how society engages with the technology and its ability to manage its development and deployment to maximize benefits and minimize harm.
Some negative aspects of digital technology’s development and diffusion stem from the technology itself and the minimum requirements for its use. Others arise from prevailing usage patterns, particularly by governments and corporations. Some of these patterns are driven by the mistaken belief that all technological advancements are inherently beneficial, while others prioritize profit maximization over social responsibility.
Digital Poverty
What sets digital technology apart from its predecessors is its pervasive integration into all aspects of human activity, creating a new reality we all must navigate. However, navigating this reality isn’t equitable; individuals and groups experience varying degrees of success in harnessing its benefits.
Success in the digital realm depends on access to both material resources (like devices and internet connectivity) and cognitive skills (digital literacy). Consequently, as engagement with the digital world becomes increasingly essential for a decent life, those lacking access or skills face a new form of deprivation: digital poverty.
Unequal access to digital technology perpetuates disparities. Those without internet, computers, or smartphones risk being left behind in education, employment, and basic services, which increasingly rely on digital technology.
While digital technology hasn’t fully dominated every aspect of life everywhere, its absence in many regions still has consequences. Even if individuals don’t directly experience digital poverty in their daily routines, they’re indirectly affected by their region’s overall digital divide, missing out on opportunities and advancements.
Indirect Impact of Digital Technology on Poverty Expansion
The indirect ways in which digital technology development can lead to increased poverty are essentially the downsides of its indirect benefits in poverty reduction. This might seem paradoxical at first. Digital technology undeniably fosters economic growth and creates new job opportunities.
However, the flip side of increased growth rates is the potential for unbalanced growth, where certain sectors or regions benefit disproportionately. Similarly, while new jobs are created, existing ones can be displaced or replaced by automation, leading to job losses and exacerbating poverty for those affected. Both unbalanced growth and job displacement/replacement can significantly contribute to the intensification and spread of poverty.
Unbalanced Growth
The rise of digital technology industries and the digital transformation of existing ones have created a preference for certain economic sectors to attract investments. This has led to faster growth in these sectors compared to traditional sectors that haven’t undergone sufficient modernization or digitalization.
Digital technology sectors demand advanced infrastructure and a highly skilled workforce, making developed countries more attractive for investment compared to developing or poor nations. Consequently, high-income countries have experienced the most growth in digital technology sectors, while lower-income countries have been left behind.
Job Displacement and Replacement
Job displacement occurs when the skills required for a job evolve due to digital technology, leaving those traditionally qualified for the role unable to keep up. This phenomenon is increasingly prevalent across sectors undergoing digital transformation.
Jobs that once required minimal education or skills now demand higher qualifications due to digital technology integration. This disproportionately affects low-income groups, reducing their job opportunities due to the increased need for individual productivity.
Furthermore, some jobs have been entirely absorbed into others due to digitalization. For example, drafters who produced technical drawings are no longer needed as engineers now use digital tools for this task. This trend has impacted many support roles, merging them into professional positions requiring higher qualifications.
Job replacement involves automating tasks, eliminating the need for human workers altogether. While displacement has been more common in recent decades, advancements in AI suggest increased job replacement in the future.
As the poorest groups often experience digital poverty, their chances of finding jobs that lift them out of poverty diminish as digital technology becomes more prevalent. The available jobs increasingly demand digital skills they cannot access.
While digital technology creates new opportunities like platform and freelance work, these often lack the security and benefits of traditional employment subject to labor laws, limiting their effectiveness in poverty reduction. Workers in such roles must cover essential services like healthcare entirely from their fluctuating income, making it challenging to escape poverty sustainably, even with temporary gains.
Digital Technology Trends that Exacerbate Poverty
Policies in many countries, particularly developing and poor ones, lack a comprehensive strategy for digital technology development and transformation that considers mitigating its negative impacts on poverty. While many nations are digitizing government services, they often neglect how this affects the poorest citizens’ access. This can worsen digital poverty, especially without traditional service alternatives.
With limited resources and weak infrastructure, countries strive to keep pace with technological advancements. However, digital transformation projects may fall short due to inadequate infrastructure. Furthermore, allocating funds to these projects can divert resources from essential infrastructure development, exacerbating existing problems and perpetuating digital poverty for those unable to access digital technology. This, in turn, hinders their ability to improve their circumstances or access resources and services that could alleviate poverty.
Many countries and businesses underutilize digital technology in agriculture, construction, and building to boost productivity and reduce costs. This is attributed to lower expected profitability compared to other sectors. Moreover, there’s a lack of strategic vision overlooking the indirect benefits of investing in affordable food and shelter. These benefits extend beyond poverty reduction to include decreased reliance on imports and addressing challenges like water scarcity, positively impacting overall economic development.
Digital Technology and Income and Wealth Inequality
The Cyclical Relationship Between Digital Technology and Income Inequality
The concept of a cyclical relationship between the advancement and widespread use of digital technology and income inequality highlights that the prerequisites for utilizing digital technology tend to favor those with higher incomes and wealth. They have the means to meet these requirements readily. Conversely, lower-income individuals often lack these prerequisites, limiting their ability to leverage digital technology for income growth.
This disparity in access to digital technology contributes to a widening income gap between different groups. Those with higher incomes can effectively utilize digital technology to accelerate their income growth compared to those with lower incomes. While the cost of some digital technology requirements may decrease over time, new requirements continually emerge, remaining out of reach for lower-income individuals.
This cycle also manifests at the national level. High-income countries possess greater capacity to invest in digital technology and develop their infrastructure, further fueling their economic growth and widening the gap between them and low- or middle-income countries. Consequently, the cyclical relationship between digital technology and income inequality perpetuates and exacerbates the unequal distribution of income and wealth, both within societies and between nations.
The Global Perspective on How Digital Technology Impacts Wealth Distribution
High-income countries stand apart from their middle-and low-income counterparts in various ways beyond just GDP figures. Wealth accumulation in high-income nations isn’t solely about asset value, but also the nature of those assets, whether material or social.
The wealthiest industrialized nations possess abundant capital and advanced, extensive infrastructure. Their accumulated social assets include higher incomes, superior services, and a larger pool of educated and skilled individuals.
These advantages allow high-income countries to adopt and develop digital technology early and continuously, making them attractive hubs for investment in digital industries. This investment further improves infrastructure and generates high-skill jobs, drawing skilled workers away from lower-income countries with fewer opportunities and lower wages.
This dynamic creates unbalanced growth and unequal opportunity distribution, concentrating opportunities in high-income nations at the expense of others. It widens the economic growth gap and perpetuates the conditions that cause it.
This phenomenon is particularly pronounced in the digital technology sector, contrasting with traditional industries that once relocated to lower-income countries seeking cheaper labor and resources. Digital technology is thus driving a reverse trend, with capital flowing towards higher-income nations.
Domestic Factors and Digital Technology Impact on Income Inequality
Digital technology’s impact varies across social groups, potentially worsening income inequality. Job displacement, for instance, while boosting productivity and incomes for some, can leave others, typically low-income individuals, without their traditional jobs. Those benefiting from displacement are often better positioned to leverage digital technology due to their higher incomes.
This disparity is amplified in developing and poor countries with inadequate infrastructure and limited education and healthcare services, hindering low-income groups’ access to and utilization of digital technology. Even reliable electricity for powering digital devices can be challenging in some areas, further widening the urban-rural income gap and potentially creating new inequalities. Without measures to ensure equitable and inclusive access, digital technology can exacerbate income inequality.
Conclusion
Digital technology alone is not a guaranteed solution for alleviating poverty or exacerbating it. Its impact is contingent upon the context of its development and use and policymakers’ awareness of its potential consequences. In scenarios characterized by income and wealth inequality, digital technology tends to amplify factors that worsen poverty and widen the existing income gap.
Therefore, digital technology cannot be viewed as a standalone remedy for poverty without accompanying policies that promote greater equity in income and wealth distribution. This prerequisite is essential for digital technology to reduce poverty genuinely; otherwise, its impact remains limited or potentially counterproductive.
This paper aimed to shed light on the diverse impacts of digital technology on both poverty alleviation and the unequal distribution of income and wealth. It has demonstrated that these impacts are not inherently positive but are shaped by a multitude of interconnected factors and pathways.
The paper has explored the potential positive influence of digital technology on factors that can mitigate poverty, as well as its potential negative consequences in the presence of factors that perpetuate poverty. Additionally, it has examined the impact of digital technology on wealth inequality and the cyclical relationship between them, highlighting the necessity of policies addressing income and wealth distribution to break this cycle.