Economic Effects of the Digital Divide: Unlocking Growth with Equitable Access
One of the most pressing issues affecting the world today is the digital divide. This term refers to the gap between those who have access to the internet and related technologies and those who do not. Although 59.5 percent of the world’s population is using the internet, a significant number of people are falling behind on their digital knowledge.
The economic effects of digital divide are significant. As technology continues to advance and evolve, more people are falling behind in digital skills and literacy. This gap impacts individual economic opportunities as well as overall national growth. Investing in digital literacy initiatives and expanding equal access to technology can help society bridge the digital divide and improve economic outcomes.
How the Digital Divide Causes Economic Inequality
Technology is becoming more and more important to the way that the world makes money. Research shows that over 80 percent of middle-skill jobs require technological skills and proficiency. The digital divide disproportionately impacts certain groups of people, limiting their earning potential and prolonging economic inequality.
According to research from the United Nations Educational, Scientific and Cultural Organization (UNESCO), approximately 45.2 percent of the world’s households do not have internet access. The digital divide is most likely to affect lower-income households, rural communities, women, and disabled individuals. Only 40–42 percent of people in developing countries have physical access to the internet, compared to 70–98 percent in developed countries.
The digital divide often occurs as a direct result of systemic inequality. One historic example is the implementation of the GI Bill in the United States. The US Congress passed this law in 1944 as a way to improve educational and vocational training among World War II veterans. The GI Bill provided money for veterans to attend school and improve their technical knowledge. According to the US Department of Defense, eight million veterans took advantage of this funding, which led to an increase in homeownership, birth rate, and overall wealth.
However, some state governments barred Black veterans from receiving the same benefits as their white counterparts. Many Black veterans were unable to gain the skills that other service members were able to enjoy. This exclusion impacted their earning potential and their ability to pass generational wealth on to their descendants. There is considerable evidence that the wide-scale exclusion of Black veterans during this era has contributed to deep socioeconomic stratification in the United States, including the digital divide. If people are unable to use or afford digital technologies now, they will not gain the skills necessary to keep up with new advancements. As time marches on, these individuals will fall further and further behind.
It is important to reduce the digital divide so that all members of a society can enjoy the benefits and opportunities that technology can provide. Additionally, people who earn more money are able to contribute more to a country’s economy. By investing in digital access and skills, a government can work to improve the quality of life for all its residents.
The Impact of the Digital Divide on the Economy
Without access to, or knowledge of, the internet and other digital tools, a person’s ability to earn and purchase will reach a limit, which negatively impacts a country’s economic state. When a country chooses to invest in a digital economy, it can witness unprecedented growth.
The Digital Divide Impacts a Country’s Gross Domestic Product
The digital divide keeps people in poverty and places a ceiling on how much a person can earn. Middle-skill jobs typically pay higher wages whereas low-skill positions can pay very little. If a person does not have access to the internet or lacks the digital skill necessary to use advanced technologies, they cannot obtain these higher paying positions and improve their economic situation.
Such a person will keep earning low wages, which means that they pay fewer taxes to the government. Their purchasing power will remain low, meaning that they are unable to stimulate the economy in ways that higher-earning individuals can. If a substantial amount of a country’s population does not have access to the internet, the digital divide represents significant lost economic opportunities.
If a country chooses to invest in digital technologies, the opposite effect can occur. In fact, a 2020 study that examined digital technology in thirty-nine African countries found a positive relationship between digital adoption and gross domestic product (GDP), which is a key indicator of economic health.
South Korea’s growth during the latter half of the twentieth century is an excellent example of how countries can benefit from digital technologies. In the aftermath of the Korean War, the country saw significant economic devastation and had limited export options, which severely impacted its economy. In 1960, South Korea’s GDP was only $1.1 million won per capita, in local currency. In worldwide rankings, this placed South Korea below Haiti in terms of GDP.
However, South Korea chose to engage in a rapid technology shift by investing in electronics production across multiple sectors. By 1990, South Korea had established itself as a major global leader in the electronics space, which has positively impacted its economy. As a result of its investment in technology, the country’s GDP grew to over $35 million won per capita by 2020. In comparison, Haiti’s global economic ranking has remained mostly unchanged.
How the Public and Private Sector Can Reduce Digital Inequality
To bridge the digital divide, investing in inclusion and literacy initiatives is essential. Organizations in the public and private sectors alike can deploy projects to help marginalized groups learn digital skills and provide them with affordable access to communications technologies, such as expanding rural broadband internet.
In fact, several projects are in progress to help communities around the world reduce digital inequality.
- Digital inclusion strategy for Cornwall and the Isles of Scilly: In the United Kingdom, the Cornwall and Isles of Scilly communities are implementing initiatives to help residents understand the benefits of digital technologies and thrive in the digital world. By targeting digital literacy and skills, accessibility, affordability, motivation, and trust and confidence, the local government hopes to reduce the number of residents who have never used the internet by 25 percent by 2023.
- Amazon’s Project Kuiper: In one example of a private company investing in digital equity, Amazon is planning to expand internet access via satellite through its Project Kuiper. Through this initiative, the company will build and launch a low Earth orbit (LEO) satellite constellation by the end of 2022. Amazon hopes that these satellites will provide reliable and affordable broadband access to marginalized global communities.
- Close the Gap: Close the Gap is an international nonprofit organization that aims to close the digital divide by donating information technology resources to developing and emerging economies. It collects and distributes previously owned devices from European citizens, such as computers and mobile phones. Between 2003 and 2020, Close the Gap collected over 1.1 million devices and supported 7,644 medical, social, and educational initiatives.
Economic Benefits and Disadvantages of the Digital Divide
Although the digital divide severely impacts those who do not have access to technology, some do see an economic benefit from it. However, the disadvantages of the digital divide often outweigh the advantages that relatively few people enjoy. By improving digital knowledge, communities can grow economies and spur innovation, leading to long term prosperity.
Advantages of the Digital Divide
Few groups, if any, promote the idea that the Digital Divide has advantages that should be maintained. Nevertheless, some advantages do accrue to certain groups as a result of its existence. For example, some argue that the Digital Divide actually helps to drive economic opportunities—businesses that sell from internet and communication technology services are able to take advantage of the high demand for their products, improving profits.
The digital divide also perpetuates systemic inequality, which is an advantage to those who benefit from it. By excluding marginalized communities from access to digital tools, privileged members can continue to maintain the societal rules that keep them comfortable and financially stable.
Limiting the number of people who have access to the internet also reduces competition for opportunities that are only available online. As a result, those who know how to navigate these technologies gain advantage because they have more chances at educational, personal, and occupational advancement.
Disadvantages of the Digital Divide
Many of the benefits of the digital divide are disadvantages for marginalized groups. By keeping a portion of the population from taking advantage of the internet, social stratification can deepen. In addition to the very real economic impact, this can stoke resentment and conflict between different segments of a community, potentially even leading to radicalization and incitements to violence.
The digital divide has an overall negative impact on the economy and deepens income inequality. Without digital skills and knowledge of advanced technologies, citizens are unable to progress in their careers and contribute less to the country’s economy.
As a result, the economy becomes less competitive. Companies that require advanced digital skills may outsource their positions to other regions, taking money away from a country’s economy. The result is more people living in poverty, which in turn impacts the financial health of their nations.
Perpetuating exclusionary systems like the digital divide hinders future growth and societal harmony. To tap into a country’s full economic potential, it is in the best interest of governments to take advantage of digital technologies and help citizens understand how to use them.
How to Bridge the Digital Divide for Underserved Populations
The digital divide disproportionately affects certain groups. Individuals who are low income, live in developing countries, and, or, have experienced systemic inequality are the most likely to lack access to the internet and other communication technologies. The digital divide helps to perpetuate a cycle of economic limitations and lack of technological knowledge.
Generally, if a person is very low income, they are unable to afford the devices, infrastructure, and monthly costs of internet access. Without access to this technology, they are unable to learn and keep up with rapidly changing technologies. They are unable to obtain higher-paying positions, apply for loans, or research public benefits and other opportunities that may be available to them.
However, local communities can help break this cycle and improve the quality of life for everyone. Advocating for equitable internet access, speaking with local government and community leaders, and working with grassroots organizations can bridge the digital divide.
For example, take Project OVERCOME, an initiative to bring fast and affordable internet to an underserved neighborhood in Detroit, Michigan. Detroit is a city in the United States that has historically lacked equitable access to the internet. Local nonprofits Detroit Community Technology Project and Grace in Action Collectives will carry out this project.
While these initiatives are powerful, they require significant funding and support from educational institutions, government agencies, and stakeholders in the telecommunications industry. For example, Project OVERCOME is possible through funding from the US National Science Foundation. Community leaders are working with Michigan’s largest local fiber internet provider to build the broadband infrastructure necessary to improve connectivity.
A collective effort is necessary to bridge the technological gap for underserved communities. When examining the economic effects of digital divide, it’s clear that improving digital literacy can be beneficial. By investing in people, governments could tap into a lucrative well of financial potential, boosting its economic state.
Supporting Economic Growth with Digital Inclusion
The economic effects of the digital divide are clear. Lack of internet access and poor digital literacy prevents individuals from fully participating in their countries’ economies. By bridging the knowledge gap, countries can leverage the full potential of their populations to innovate and grow, improving the quality of life for everyone.
To learn more about the global digital divide and explore ongoing solutions to help bridge the gap, check out this webinar from IEEE Future Directions.
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