While trade and foreign agents received most of the blame during the presidential campaign, technological developments can have an even larger impact on income inequality. Entrepreneurs in the digital economy have generated numerous new jobs and higher incomes for many. At the same time, the Internet has put enormous pressure on local and national labor markets. If the Trump administration wants to succeed in creating sustainable jobs and income for the workers and regions bypassed by the digital transformation, it needs to implement a tech policy that boosts the positive impacts of technology while controlling its corrosive effects.
Information and communication technologies (ICTs) influence income inequality and the extent of poverty in three interrelated ways. Key drivers of automation, they contribute to increased productivity but also eliminate jobs. By facilitating capital and knowledge mobility, they expose workers to increasing national and global competition. And digital innovation is further reducing the demand for labor. All three contribute to skill-biased technological change that widens the gap in pay between high-skill and low-skill jobs.
