Every technological advance has changed the way we work. With the plough, the hunter-gatherers became farmers. The spinning jenny and the power loom of the Industrial Revolution transformed farmers into factory workers. With the digital revolution, white-collar workers became software experts. And now, Web3 has the potential to change the way we work.
Technology is the agglomeration of tools, techniques and methodologies used to produce goods, provide services or meet an objective. Technology can be embodied in devices and systems which can be run by persons who need not possess detailed knowledge about their functioning. Work is the enabler that uses physical and intellectual resources to create value from various raw materials. It is a combination of effort, exertion, or exercise of skill.
To understand how technology affects work, we have to understand how technology moulds the nature of the source of work, the employer or the firm. Ronald Coase, the Nobel Laureate and author of the 1937 paper “The Nature of the Firm” pioneered the study of this inter-relationship [1]. Small firms lose the efficiencies of scale. However, the big firms are unwieldy. There is an optimum, in-between size. Coase explained how the difference in the transaction and information costs within and between firms determine the extent of the firm’s workspace. Firms are constantly improving their skill and methodologies in measuring workers’ productivity, leading to a reorganisation of businesses. Added to this, technological changes are re-drawing the corporate organisational structure. Technology has constantly and consistently transformed the way workers execute their work. It has continually improved working conditions and streamlined tedious processes, improved productivity and efficiency and made work from anywhere easier than ever. Instant messaging and payment are ubiquitous. Access to online communication has enabled closer cooperation and collaboration among workers even working remotely through video-conferencing and document sharing using the cloud.
Zuboff, in her 1988 paper “In the Age of the Smart Machine: The Future of Work and Power” documents the impact of the adoption of information technology in organizations on work. Zuboff’s key insights are about the nature of information and its significance in restructuring and redefining the patterns and meanings of work [2].
Technology changes the nature of firms. With the availability of electrical power, there was no longer the need to depend on a central source of steam power. Larger, more efficient factories appeared. But new technologies had also a more subtle effect on the business. They redefined the scope and extent of business that is a firm’s focus.
Before the Industrial Revolution, manufacturing was based on companies procuring raw materials and outsourcing manufacturing to craftsmen who were self-employed at home and paid by piece-wise output. On the other hand, factories employed workers directly and were paid by the hour, increasing the worker-firm relationship.
In the period 1980–2010, globalisation and the IT boom had a net effect of shrinking the scope of the companies as found by Lorenz Ekerdt and Kai-Jie Wu of the University of Rochester [3]. The scope of American manufacturers shrank by half between 1977 and 2017. Similar things happened in Germany and England.
Aided by computer networks, employees can work from anywhere. Employees collaborate even with strangers. Work environments support different types of working styles and conditions. Computer networks allow remote control of a variety of devices as well as the microenvironment of the workplace. Clever robotic workers perform an increasing variety of tasks with a high level of technical skills, and with benefits that include lower costs, higher quality, improved safety, and environmental protection. With the rise of the Internet, it has become possible to communicate instantaneously as well as asynchronously across time and space or to access vast bodies of information without visiting a library or other repository.
Technology is enabling seamless collaboration between companies. Slack is a messaging platform that lets users communicate with outside firms as they would within their organisations used by more than 70% of the Fortune 100 list of America’s biggest firms. The Atlanta Fed’s survey found that 16% of responding firms had increased domestic outsourcing and 6% had offshored more. The Economist reports that the combined revenues for six giant Indian IT-services firms — Cognizant, HCLT, Infosys, TCS, Tech Mahindra and Wipro — grew by 25% between the third quarter of 2019 and the same period last year [4].
As automation is throwing workers out of jobs, many are becoming floating workers. The Online Platform Economy has enabled more employers and employees, suppliers and consumers, and even suppliers and businesses to find each other and exchange labour and goods. Today’s workers can get on to the internet, use any number of job-seeking sites and find remote jobs or positions available to freelancers from anywhere. Companies can hire qualified candidates across continents if they like. However, the number of full-time workers still outnumber the remote employees[5].
Freelance workers now constitute the gig economy. Gigging allows a worker to slide from job to job or take multiple freelance jobs simultaneously. The gig economy allows small businesses to hire contractors on a job-to-job basis making managing a small business easier in some ways.
A last comment on the fact that the impact of technology permeates beyond the boundaries of manufacturing and impacts other forms of work. Technology has transformed distance learning teaching both qualitatively and quantitatively by opening digital classrooms and massively open online courses (MOOCs). MIT’s “Circuits and Electronics” course in March 2012 had more than 100,000 students from more than 160 countries. In absolute terms, 7,157 students passed in one semester — as many as the number of graduates coming out of MIT in a period of forty years [6].
[1] Coase’s theory of the firm, https://www.economist.com/schools-brief/2017/07/28/coases-theory-of-the-firm [2] S. Zuboff, In the Age of the Smart Machine: The Future of Work and Power, https://www.hbs.edu/faculty/Pages/item.aspx?num=266 [3] Lorenz K.F. Ekerdt, Kai-Jie Wu, The Rise of Specialized Firms, https://drive.google.com/file/d/1k7_te0qy6Kkt0KwZrEyfwJ5X6DArYnr4/view [4] https://www.economist.com/business/2023/01/08/how-technology-is-redrawing-the-boundaries-of-the-firm [5] https://smallbusiness.chron.com/technology-affect-work-environment-today-27299.html [6] Diana Farrell, https://www.jpmorganchase.com/institute/research/labor-markets/insight-technology-and-the-future-of-work