Low internet access is driving inequality (opinion)

High-speed Internet is key to working from home, to educating children when they cannot attend school in person, to telemedicine, to benefiting from social support programs and to allowing access to financial services for all, especially for those who live in remote areas.

Still, Internet use remains a luxury: Half of the world’s population does not have access to the Internet, either through a mobile device or fixed line broadband.

Advanced economies like the United States, France, Germany, the United Kingdom, and Canada have the highest access rates. The large emerging economies show great disparities in the proportion of Internet users in their populations, ranging from approximately two thirds in Brazil and Mexico to approximately one third in India.

Sub-Saharan African countries, followed by many of Asia’s emerging and developing economies, are among those with the lowest access to the Internet despite being world leaders in mobile money transactions. There is also a large variation in Internet connectivity by companies in sub-Saharan Africa: only around 60% of companies use email for business, compared to around 85% in Europe and Central Asia.

Wider inequality

Lack of universal and affordable access to the Internet can increase income inequality within and between countries.

• Within countries. Income inequality and inequality of opportunity can worsen, even in advanced economies, because disadvantaged groups and people living in rural areas have more limited access to the Internet. The disparity between men and women in their participation in the labor force, wages and access to financial services can increase when there is a gender gap in Internet access. This could be the case in many emerging and developing countries where fewer women than men own a mobile phone.

• Between countries. Relatively low Internet access could depress productivity in emerging and developing countries. Research by IMF technical staff reveals that a one percentage point increase in the proportion of Internet users in the population increases per capita growth by 0.1-0.4 percentage points in sub-Saharan Africa. The Covid-19 pandemic demonstrates that having a reliable Internet allows some companies to continue their operations amid blockages, keeping economies running.

So how can policymakers support affordable and universal access to the Internet?

Governments can foster a digital-friendly business and regulatory environment for the private sector. This can be instrumental in accelerating and financing infrastructure investments.

Government support, for example, ensuring that investment in the Internet is complemented by universal access to electricity, is essential. In addition, subsidies may be needed to ensure that all households, including disadvantaged groups and those in rural and remote areas, have access to quality Internet and to ensure that there is no digital gender gap. For example, in response to the Covid-19 crisis, the governments of El Salvador, Malaysia, and Nepal have introduced internet discounts or waivers.

Policies should also be geared towards closing the Internet gap for businesses. Expanding small business access to financial products, such as loans, will allow these companies to make productive investments in information and communication technology. Governments may also see tax savings from digitization. They can reduce the public cost of tax compliance through greater access to taxpayer data and improved spending efficiency, which in turn can help fund these policies.

Given the growing role of the Internet for the economy and access to public services, policies to foster an inclusive recovery should aim to address the digital divide within and between countries.

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