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Digitalisation of the Economy and Vulnerability of Older Persons: Legal Perspectives


General issues

 

Fertility rates across the world are decreasing. According to the World Bank, in 2022 the global fertility rate was 2.3[1], just above the replacement rate. This trend is more advanced in some regions of the world than in others. Developed countries, in particular, already face a situation where the average age of the population is increasing. It is generally accompanied by longer life expectancies. Absent unforeseen events, humanity as a whole will age. This process is already well under way in many parts of the world, where people live longer as societies age.

This demographic shift poses significant challenges to pension and public health care systems, creating pressures to raise the retirement age. The average normal retirement age across OECD countries in 2022 was equal to 63.6 years old for women and 64.4 years old for men. Future normal retirement ages are expected to continue to rise and reach 65.8 for women and 66.3 for men on average in OECD countries for persons who entered the labour market at age 22 in 2022[2].

Ageing of populations challenges not only pension and healthcare systems, but also economic growth and innovation. While immigration may offset these issues to some extent, it brings its own significant challenges, such as possible intense social tensions as receiving societies and migrants adapt to new realities. Without effective policies, these tensions could persist, especially if migrants’ culture differs significantly from the one prevailing in the receiving state. Additionally, as global fertility rates drop it is quite possible that with time access to migrants will become increasingly limited.

Technological progress, particularly in the area of information technologies, is also rapidly transforming the way people work, conduct business, pay taxes, shop and socialise. These changes are both swift and profound. With reasonable likelihood it can be assumed that new breakthroughs may occur, not necessary in the realm of information technologies. It is difficult to predict the exact nature of these breakthroughs, but when they occur, they are likely to accelerate the rate of changes that take place in social and economic realities. In other words, people will be expected to be economically active further into their lives. Simultaneously the realities of labour and business are likely to continue their increasingly rapid transformations.

As people age, their capabilities naturally tend to decrease. This may be offset by accumulated experience as well as social and economic capital. It may be however increasingly difficult to rely on past experience in the professional context due to the socio-economic changes resulting from technological progress. It may be increasingly difficult to adapt to changes with age. It can be therefore argued that the current reality of constant and rapid change creates largely unprecedented difficulties for older adults, as they are expected to work longer.

Technological advances therefore pose certain challenges to older persons who are expected to remain economically active. At the same time, these advances, in particular in terms of automation of both physical and intellectual labour, create a perspective of offsetting some challenges posed by ageing of societies to economic growth and pension systems. There exists a perspective, where due to technological progress shrinking workforce may become sufficient for continued economic growth and funding of pension systems. Strains caused by a shrinking workforce may also contribute to faster paces of automation of the economy. As of today, however, automation does not seem to visibly limit the need for human activity, both in terms of physical and intellectual labour. It does, however, transform the economy affecting jobs and business activity. In all likelihood, this will continue to be the case at an increasing rate.

It is important to add that economic activity may have a positive impact on older persons. This effect may also be negative for persons in high-demand or low reward jobs. There is also a potential for widening health inequalities between those able to reduce working hours, and those who have to continue working full-time[3].

 

Older persons and digitalisation of the economy

 

The notion of older persons (older people) can be defined in a number of ways. According to one definition, an older person is a person who is over 60 years of age[4]. Older persons are also being understood as persons aged 65 years or more[5]. It is difficult to be precise in this context, as people can biologically age at different rates. It can be therefore argued that instead of just age, ‘frailty’ may have a bigger impact on the functioning of an individual[6].

Furthermore, it is worth to note that the working age population is being defined as the share of 15- to 64-year-olds in the total population[7]. This means that a person who is 65 years old is not considered a part of the working age population. At the same time, persons who have reached this age remain below the retirement age in a number of OECD countries.

The digital economy has a number of definitions[8]. Deloitte defines the digital economy as the economic activity resulting from billions of online connections among people, businesses, devices, data, and processes[9]. The meaning of digital economy is an evolving one. It focuses on the way digital technologies, services, products, techniques, and skills are being integrated across economies[10].

When discussing the digital economy, the following digitalisation technologies are being highlighted: the Internet of things, big-data, blockchain and Artificial Intelligence[11]. Digitalisation is not necessarily limited to non-physical activities, as information technology plays a key role in automation of physical labour and robotics.

An important aspect of digitalisation is a shift from analogue tools to digital ones in terms of already existing forms of activities. This may be connected to particular challenges from the perspective of older persons. Familiar tools and methods of functioning may become obsolete, adapting to new ones can be stressful and challenging and competing with younger persons, for whom new tools and methods are natural and intuitive, difficult.

 

Possible responses

 

Requiring older persons to work longer into their lives seems largely inevitable. The digitalisation of the economy makes these demands particularly challenging. Older persons should not be left to themselves and specific policies should be implemented in order to assist them with facing these challenges.

Possible ways for amelioration include improving working conditions, phased retirement (where persons are gradually moving from working full-time to part-time work, eventually moving towards full retirement) and part-time work after retirement[12].

Businesses should be encouraged to employ older persons and create working conditions which are friendly towards them. Policy instruments aimed at creating appropriate incentives may include changes in tax law. In particular income taxes may be modified by introducing tax relief related to employing older persons. This should be accompanied by publicly funded training made available to older persons aimed at helping them to adjust to the digitalisation of the economy.


[1] World Bank, Fertility rate, https://data.worldbank.org/indicator/SP.DYN.TFRT.IN (access: 30.10.2024).

[3] See: S. Baxter, L. Blank, A. Cantrell, E. Goyder, Is working in later life good for your health? A systematic review of health outcomes resulting from extended working lives, BMC Public Health 2021, no. 21, p. 1356.

[4] UNHCR, Emergency Handbook. Older persons, 2024, p. 1.

[5] Eurostat, Ageing Europe. Looking at the Lives of Older People in the EU, 2020 edition, p. 8.

[6] National Health Service, Improving care for older people, https://www.england.nhs.uk/ourwork/clinical-policy/older-people/improving-care-for-older-people/ (access: 26.10.2024).

[7] See: OECD, Working age population, https://www.oecd.org/en/data/indicators/working-age-population.html (access: 28.10.2024).

[8] For a more comprehensive overview of these definitions see: R. Bukht, R. Heeks, Defining, Conceptualising and Measuring the Digital Economy, International Organisations Research Journal, September 2018, pp. 6-10.

[10] Wharton Online, What Is the Digital Economy?, https://online.wharton.upenn.edu/blog/what-is-the-digital-economy/ (access: 29.10.2024).

[11] See: C. Chauhan, V. Parida, A. Dhir, Linking circular economy and digitalisation technologies: A systematic literature review of past achievements and future promises, Technological Forecasting and Social Change 2022, no. 177, p. 7.

[12] Eurostat, op. cit., p. 96.

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