Digital technology is all around us, affecting every aspect of our lives. Firms are at the forefront of adopting new technology, whether it’s e-commerce, cloud computing, big data, 3-D printing, the Internet of Things, robotics or artificial intelligence. But how does technology change how firms operate? Does it affect the prices consumers pay for their products or the jobs firms offer in the economy? Together with our global network of central banks, the Bank of Canada surveyed over 6,000 firms from around the world. Using this survey data, this paper assesses the effects of digitalization on firms’ pricing and employment decisions.
Source: Bank of Canada Business Outlook SurveyLast observation: 2018Q2
According to our survey of Canadian firms, e-commerce is one of the most-adopted digital technologies, especially in the trade sector (Chart 1). This reflects retailers’ shift to multichannel selling strategies (e.g., through websites and in stores). Not surprisingly, manufacturing firms find significant value in robotics, the Internet of Things and 3-D printing. Overall, large firms in Canada and around the world are ahead of small firms in adopting digital technologies. And US firms are ahead of Canadian and European firms.
Claims are often heard in the media that new technologies will allow firms to “automate away” many jobs. We investigated the impact of digital transformation on the labour market by asking firms whether they anticipate changing their hiring plans. Results do not point to a massive digitally induced automation of employment, at least not in the near term. Many firms actually expect to hire more workers, especially those with digital skills and in areas where digital technologies are enabling stronger sales.
That said, large firms do expect that technology will allow them to automate processes and production, and they anticipate employing fewer people to get the same job done (Chart 2). On balance, the global results point to some expected downward pressure on employment, though less so in Canada.
Note: Balance of opinion indicates the percentage of firms expecting an increase in employment minus the percentage expecting a decrease. Excludes firms citing "don't know" and regions that did not report firm size.
Source: Network of central bank business surveys and liaison programsLast observation: 2018Q2
When it comes to prices, Canadian businesses report that it is difficult to pin down the net effect of digitalization. Digital technologies affect firms’ operations in several and often offsetting ways. On the one hand, putting all these technologies in place takes time and effort, which can push up firms’ costs and thus prices. In addition, some firms in the services sector say that better customer data or price discrimination allows them to charge higher prices. On the other hand, digital technologies, such as robotics, can help firms to become more efficient and to automate, making it cheaper to produce goods and services. Firms also report that they face external pressure to lower prices. For instance, selling on the web exposes a firm’s prices to online comparison and thus fiercer competition. On balance, firms judge that digitalization implies prices will be slightly lower, especially among large firms.