How will an increasingly digitalised economy affect poverty and social exclusion?

Digit Co-Director Professor Jacqueline O’Reilly, together with Research Fellows Dr Rachel Verdin and Dr Ann McDonnell, investigated these questions as part of a major European Horizon research funded project spanning seven countries.

The EUROSHIP project aimed to provide original and gender-sensitive assessment of the current gaps in social protection against poverty and social exclusion in Europe during ongoing digital transformation. The project aimed to develop policy recommendations on how to strengthen social citizenship at the national and EU level.

The project ran from February 2020 to July 2023 with a research consortium made up of nine European universities – including the University of Sussex, representing the UK – and a network of civil society organisations.

Methodology

The project combined diverse methods, data and disciplines (including economics, political science, social policy and sociology). The project utilised:

  • Coordinated life course interviews with low-skilled and low-income women and men
  • Focus forums with national stakeholders
  • Policy analyses based on document review and semi-structured expert interviews
  • Quantitative analyses of comparative micro-data

Key findings

Digit researchers Jacqueline O’Reilly, Rachel Verdin and Ann McDonnell focused on the effects of the digitalised economy for risks of poverty and social exclusion.

The research highlighted the importance of understanding policy and its implementation in the context of a wider ‘digital work and welfare ecosystem’. In this ecosystem, interactions between state, business and community actors are key to shaping the effectiveness of digital transformations.

The findings are explored in more detail below.

  • Overall, the level and quality of household digital assets are closely tied to country or regional levels of digitalisation and public policies. Governments have been aware of the need to identify policies to address the social, economic and cultural transformations resulting from digitalisation.
  • These policies often focus on issues of connectivity and digital assets, i.e., access to the hardware or the digital skills to use the software. However, access and usage are divided across a number of intersectional dimensions related to gender, class, age, ethnicity, disability and region.
  • Some organisations are making innovative inroads to address these problems, but these actions are often fragmented and poorly coordinated.
  • The digital transformation of work and the use of digital technologies can reduce costs and have the capacity to access large pools of flexible labour. Workers may also benefit from increased flexibility and access to new work opportunities.
  • The potential benefits for workers are seemingly mismatched with the practical realities they experience; it is typically used to supplement other jobs, though for some workers it is their main source of income.
  • The dynamic nature of digital employment presents emerging barriers to equitability. These patterns of exclusion affect citizens in different ways and have the potential to marginalise already vulnerable groups. Operating beyond the coverage of social protection systems, these workers are often impeded in their capacity to exercise full and effective social citizenship.
  • Workers are subject to poor working conditions and precarity resulting from this uncertain employment model. Their ability to seek collective redress is undermined by the imbalance of bargaining power resulting from this uncertain employment relationship.
  • The regulatory loopholes identified also have the potential to extend beyond platform labour markets, underlining the need for caution. The emergence of unregulated digital forms of management in standard employment relationships is indicative of how the problem is set to evolve.
  • Attitudes to digital technology in general are quite contradictory, with both positive and negative perceptions of its expected outcomes.
  • Individuals’ perceptions of their digital skills produce some expected differences in the gaps between different communities across all countries. For example, women, older people, the less well-educated groups and those living in households without children have a lower evaluation of their skills compared to men, younger, the better educated and those living in households with children.
  • However, while this is similar across all countries, the extent of these differences varies between countries. Italians and Hungarians have lower levels of confidence in their digital skills than those in countries like Estonia, Spain and the UK.
  • Comparing eGovernment Benchmark for 2021 data suggests provision and usability of digital services is not always associated with citizens’ improved perceptions of their digital capabilities. This may be a time lag factor or may reflect more entrenched divisions around accessibility and skills, particularly for less well-connected groups.
  • The seven countries taking part in the research illustrate very different digital welfare ecosystems and the conditions for exercising social citizenship. Initial analysis suggests that these range from systems with high levels of synergies between core actors (Norway and Estonia); more stratified (Spain), fragmented (UK) or federalised (Germany) systems; and countries exhibiting elements of hybrid polarisation (Hungary) or uneven and poorly coordinated development (Italy).
  • The state is significant in all cases. However, more effective systems have seen stronger state leadership synergising with other actors (Norway and Estonia). In contrast, countries that have been lagging behind have been likely to mention the role of EU led interventions shaping this evolution (Hungary and Italy). The plurality of state actors at local and national level is more evident in the UK and Germany, albeit with different consequences on their impact for the role out of digital public services.
  • Digital public services were catalysed by the need to connect with these communities, in particular during lockdown. In some cases where the state was unable to coordinate this effectively, citizen groups emerged to address these gaps through digital and non-digital means.
  • Well-established indicators of poverty and inequality are highly correlated with digital poverty; the move to ‘digital by default’ only serves to amplify these inequalities and the weaknesses of digital social citizenship dialogues.
  • Through this analysis and evidence, the concept of digital welfare ecosystems to capture the digital transformation of public services was developed. One of the strengths of this approach has been to identify new and emerging interdependencies between the triad of actors: government, business, and community third sector organisations (Figure 1). The concept is used to examine and evaluate how new forms of social citizenship can be promoted. Social citizenship here relates to how the opportunity for exercising social rights is shaped by the nature of social dialogue, interaction and coordination between these actors and the implementation of mutually beneficial and effective change. This is in keeping with the aims outlined by the European Commission (2021) ‘2030 Digital Compass’

Figure 1: Interactions between state, business and community actors shape the emerging digital work and welfare ecosystem

Figure 1: Interactions between state, business and community actors shape the emerging digital work and welfare ecosystem

  • The EU has a well-established record in monitoring gender inequalities through the European Institute for Gender Equality (EIGE) and the Gender Equality Index (GEI). More recently, since 2017, it has sought to include indicators on intersectionality and multiple forms of inequality.
  • Research evidence indicated a very poor level of collecting evidence on the impact of intersectional inequalities in general, and in particular concerning the impact of the digital transformation of public services. The importance of this became very apparent during the pandemic.
  • A new Subgroup on Equality Data from the European Agency for Fundamental Rights (FRA) has monitored this evolution across the EU, including the UK. They have provided a ‘Compendium of Good Practice’ for more broad ranging equality data collection.
  • Good practices include: Setting up structures that enable a systematic, long-term and cooperative approach to collection and use of equality data; and operational guidelines on how to ensure comprehensiveness, timeliness, validity, reliability and representativeness of equality data and to improve their comparability.

Institutional and structural guidelines require:

  1. Mapping existing sources of equality data and identify data gaps
  2. Foster inter-institutional cooperation in the collection and use of equality data
  3. Setting up a data hub on equality and non-discrimination
  4. Building institutional capacity to collect robust and reliable equality data
  5. Facilitating effective use of equality data

Operational guidelines require:

  1. Ensuring comprehensiveness of equality data
  2. Mainstreaming equality data into EU and national surveys
  3. Ensuring regular and timely equality data collection
  4. Enhancing validity and reliability of equality data
  5. Ensuring representativeness of equality data
  6. Improving comparability of equality data
  • As a complement to these guidelines, the subgroup prepared a diagnostic mapping tool that EU Member States can use to assess the availability of equality data collected at national level and a compendium of practices that can provide inspiration when implementing the guidelines.
  • One of the key findings from this comparative assessment is the need for an intersectional sensibility in the construction of policy regarding digital access to welfare, education, and health. New dimensions of digital inequality are often embedded in historical poverty trends. Limited intersectional data restricts the potential to understand the problem and develop effective policy solutions. The deepening risks of poverty and social exclusion for those already marginalised by digitalisation might well be exacerbated given this lack of attention to the impact of these changes for groups in vulnerable positions across Europe.

Research outputs

Comparing the digital transformation of welfare delivery in Europe
Jacqueline O`Reilly and Rachel Verdin (2021), EUROSHIP Working Paper No. 8

The digital transformation of work and associated risks
Rachel Verdin and Jacqueline O`Reilly (2021), EUROSHIP Working Paper No. 9

EU Citizens’ attitudes to digitalisation and the use of digital public services: Evidence from Eurobarometers and eGovernment Benchmark
Ann McDonnell, Rachel Verdin, Jacqueline O’Reilly (2022), EUROSHIP Working Paper No. 12

Digital Welfare Ecosystems in Europe: Social protection systems preventing social exclusion and enhancing opportunities to participate in the digital economy
Rachel Verdin, Jacqueline O`Reilly and Ann McDonnell (2023), EUROSHIP Working Paper No. 23

The effects of intersectionality on citizens` opportunities to exercise social rights and participate in the digital economy
Rachel Verdin, Jacqueline O`Reilly and Ann McDonnell (2023), EUROSHIP Working Paper No. 26

The effects of intersectionality on citizens` opportunities to exercise social rights and participate in the digital economy
Rachel Verdin, Jacqueline O`Reilly and Ann McDonnell (2023), EUROSHIP Working Paper No. 28

Better outcomes for everyone? The UK’s fragmented digital ecosystem of work and welfare
Jacqueline O’Reilly and Rachel Verdin (November 2023), Digit Policy Brief

The impact of the digital transformation of work and social services on intersectional inequalities
Jacqueline O’Reilly, Ann McDonnell and Rachel Verdin (February 2023), EUROSHIP Policy Brief No. 5

Written evidence submitted by Dr Becky Faith, Professor Jacqueline O’Reilly and Dr Rachel Verdin to the House of Lords Communications and Digital Select Committee inquiry into ‘Digital exclusion and the cost of living’ was cited in the Committee’s final report, ‘Digital exclusion’ (2023)

Written evidence submitted by Dr Rachel Verdin and Dr Becky Faith to the House of Commons Work and Pensions Committee inquiry, ‘Benefit levels in the UK’

Written evidence submitted by Dr Rachel Verdin and Professor Jacqueline O’Reilly to the House of Commons Committee of Public Accounts Committee inquiry, ‘Digital transformation in government: addressing the barriers to efficiency’

Written evidence submitted by Dr Rachel Verdin and Professor Jacqueline O’Reilly to the House of Lords Public Services Committee inquiry, ‘Designing a public services workforce fit for the future’ was cited in the final report, ‘Fit for the future? Rethinking the public services workforce’

Mapping our digital ecosystem can help policymakers drive digital transformation
How can public sector organisations ensure digital transformation is good transformation?  Rachel Verdin on why we need to start by understanding the UK’s digital welfare ecosystem.
Digit Debates – Digital levelling up in Sussex
Becky Faith, Simon Hughes and Emma Daniels, chaired by Rachel Verdin

The future of work and welfare in the digital economy – new risk of poverty and social exclusion
EUROSHIP, EuSocialCit and WorkYP

UK researchers

University of Sussex Business School
University of Sussex Business School
University of Sussex Business School