22 Oct The Accessibility of Technology and its Impact on the Income Gap

The past decade has seen a remarkable decrease in the growth of the income gap. While only a few seem to care or even notice, this trend has an impact on economic policy.

According to the “Trends in Distribution of Household Income” report by Congressional Budget Office, there was a significant rise in inequality from 1979 to 2007. The income grew by 275% for the top 1% of households, 65% for 19%, slightly under 40% for the next 60% and 18% for the bottom 20%. Based on the income measure, the Congressional Budget Office established that the rise in inequality was between 23 and 31% within this period.

However, from 2007 to 2014, the curve stabilized. The gap only raised by 3% going by the market income. Factoring in the in-kind transfers and in-cash payments from government programs, the gap closed within this period.

In addition to the Congressional Budget Office report, there’s another measure of inequality that factors the labor-market earnings. It starts by ranking employees by the amount they earn every week. It then compares the earnings between the lowest paid worker and the highest paid worker.

Until recently, the ninth decile workers were earning more than the tenth decile workers. In the 90s, the former earned about 4.5X as much as the latter. In 2012, the amount rose to 5.2X as much. But in the last six years, the difference has leveled up, confirming the Congressional Budget Office report.

It’s important to keep in mind that inequality – the income gap between the lower- and higher income households – differs from earnings and income growth among non-rich households. So, the gap could close while the quality of life of the non-rich Americans is better, worse or still the same.

Access to technology and its impact

According to a Hootsuite report, more than 4 billion people around the globe are using the internet. This is more than half of the world’s population. The latest data reveals that almost a quarter a billion of new users joined the online community for the first time in 2017. Much of this growth can be attributed to the availability of affordable mobile plans and smartphones.

The access to the internet has become progressively more crucial for searching for information, participating in a changing world economy and looking for jobs. The internet is an excellent communication tool with users across the world staying ahead of everything that’s happening. But more than that, the internet has played a more prominent role in closing the gap between the rich and the poor, thanks to the endless opportunities it provides.

The internet offers a level ground between well-established firms and startups. Unlike before where the top brands would dominate the market, now, even the smallest players in the industry can still influence the market.

According to ONE, connection to the internet could not only create new jobs but also generate $2.2 trillion of economic growth.

The technological advancement has seen the narrowing of the income gap between the high income and low-income households. And if the above statistics are anything to go by, the gap will eventually close up translating to more growth and economic development.

How technology can help close up the income gap

The economic benefits of internet connection could be harnessed with the current worker skill sets. United States data indicate that more internet users in a household correlated with (but didn’t necessarily lead to) higher income and shrinking income gap. Superior broadband connectivity changes the value generation process and increases the innovation speed.

Recognizing its advantages needs new complementary skills that are broadly available in big cities and towns.  The metropolitan areas in the US that have widely adopted broadband connection enjoy higher average household incomes and less income gap. But this is not to say that the rural areas are left behind. Today, more and more people from these areas are plugging in to enjoy and leverage the opportunities presented.

Technology and business

Investment in technology, such as automation and cloud technology have revolutionized the way data is generated and stored, leading to a shifting economic landscape. Thanks to technological advancements, startups and established businesses alike, have seen an increase in productivity and efficiency, resulting in increased profitability. But that’s not all; technology has also allowed companies to:

1. Work remotely

With the improvements in server and internet technology, individuals can now work from wherever they please and still stand a chance to influence their market. In addition to the lifestyle benefits that remote working brings, it also enables people to work from anywhere in the globe, including overseas, on airplanes and even while sick.

2. Improved accuracy

Technology has also improved the accuracy of different applications that were traditionally full of errors. Automated software and programs take care of repetitive tasks that were otherwise done by hand – this ensures accuracy and also saves valuable man-hours that could be spent on this tasks and correcting errors.

3. Increased collaboration

Traditionally, business conversation was restricted to individuals who were on the phone or in the same room. These limit the number of people that could be a part of a discussion at one go. But now, it is possible for people to communicate even when they are worlds apart, whether it’s through video conferences with all participants looking at the same information at once, or through audio meetings and so on. When more minds work on a certain project, it allows businesses to arrive at the strongest conclusion fast and efficiently.

Conclusion

Technology presents huge benefits for business people; it not only allows them to work virtually but also provides a level ground where they can competitively sell their solutions. And as technology keeps getting more accessible, more people are launching businesses online, making a decent living and even expanding their reach across the globe.

A New study from Ericsson reveals that access to a broadband connection can help increase household income, suggesting that the monthly income in OECD countries can rise by US$120. Going by the numbers, technology is playing a big part in helping the income gap shrink.