What is the digital economy? The digital economy refers to an economy that is based on digital computing technologies. An example of a digital economy is Amazon. This economy revolves around high-tech computing and the internet to communicate with consumers. The digital economy replaces the traditional retail style shopping which is known as creative destruction.
Another example of a popular digital economy is eBay. eBay is a platform where individuals and suppliers can buy and sell goods and services. Consumers can also bid for the good. The website uses PayPal, which is an American company which operates worldwide and supports online money transfers and services an electronic version to traditional paper methods. In order for these digital economies to work, many skilled workers are required to collectively use their knowledge to create a platform. This means that the introduction of new digital economies decreases the rate of unemployment, which is currently at 4.7%.
The digital economy requires suitably skilled workers, for example those that have been trained in the technology field, these workers are usually in short supply. This means that the wage price increases as supply is less than demand. As wages increases, it will give people more incentive for them to train under the technology field, this results in lower unemployment due to the many jobs created. This also corrects the problem of unemployment being central for those who are younger.
However, the increasing rate of the digital economy can also cause unemployment. This is because the traditional methods of retail, such as the shops on the high street, will soon be overtaken by the internet. This causes high street retailing shops to close down as less profit is produced. This then results in some workers losing their jobs, which increases the rate of unemployment. Furthermore, older workers would most likely impact from this the most as they do not have the skills to move jobs into the digital economy.
Although the digital economy does create jobs, it also causes many jobs to be lost. And as the internet is constantly growing very fast, these effects should soon be visible to the overall economy. UK’s unemployment rate will increase as retail is the UK’s largest private sector employer, employing around 2.77 million people in the UK. The digital economy employed 1.3 million people in 2014, and 5% of all those employees were in the UK. This shows the massive difference between those who work in store and online.