Technology and Unemployment

In economics capital is one of produce’s factors and within it is technology.

Technology is affecting our lives in every specter. Since the industrial revolution we have rising living standards as throughout much of the world people live longer, lead healthier lives, work less  and have better jobs. It exists a relationship between technology and unemployment and the question we want to answer is “How does technology affects unemployment?”. Neoclassical admit that technology causes no effect in long-run because people create other jobs, even though possibly after a long period of painful adjustment.

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In general, that prediction has proven to be true, data shows that productivity and employment have tracked each other. As businesses generate more value from workers, the country becomes richer which fuels more economic activity and creates more jobs. But from 2000s they diverge. In 2011 there is a gap, while productivity has never been higher, the employment wilts. Authors see something different at nowadays digital and robotic technology and claim that it is killing jobs faster than creating new ones.  Canova, Lopez, & Michelacci (2012) show that in developed countries positive technology shocks can cause unemployment to rise because the wave of layoffs remains high and the job finding rate takes time to recover. Collard & Dellas (2004) came to same conclusions.

  For most of G7 countries, positive technology shocks lead to a decline in hours and tend to generate a negative movement between employment and productivity (Gali, 1999). Brynjolfsson, a professor at Sloan School of Management and Andrew McAfee say that technological change is destroying jobs faster than creating them. Brynjolfsson says technology is behind productivity growth and the weak jobs growth. People are falling behind because technology is growing faster than our skills and organizations aren’t keeping up (E.Brynjolfsson & A.Mcafee, 2014). Another study conducted by the International Labor Organization, states that in Cambodia, Indonesia, Philippines, Thailand and Vietnam approximately 56% of the total workforce is at risk of displacement by robots (Chang & Huynh, 2016).

But there is still little research done in the emerging economies because other evidence suggests that in countries like China and India  technology is creating jobs through the rise of the IT services and other digital jobs and by the ability of individuals or firms to use digital tools. According to Frey & A.Osborne (2013) around 47% of total US employment is in the high risk category, jobs that may get automated maybe over the next decade or two. They say that most workers in transport and logistics, office and administrative support, and production occupations are in risk. They find that a big share of employment in service occupations, where most US job growth has happened on the past decades is very susceptible to computerization. The study claims that as technology advances, low-skill workers will move to tasks that are non-susceptible to computerization and that require creative and social intelligence skills.

 But Katz (2014), a Harvard economist, says no data show a net decrease in jobs in long-term. People were always able to create new jobs. He doesn’t dismiss the idea that there is something different on nowadays’ technology that could affect an even bigger range of work. Autor (2015), an economist at MIT also doubts that technology could account for that. Computers have replaced tasks which provided middle-class pay. But demand has increased for low-skill jobs as restaurant workers, janitors that are difficult to automate and higher-paying jobs requiring problem-solving skills. The result is an extinction of the middle class. But even if digital technologies are holding down creation of jobs, history suggests that it’s temporary as workers adjust their skills and entrepreneurs create opportunities on new technologies.

  So we can say tech-progress more changes the nature of jobs not unemployment rate. Another study, “Lousy and Lovely Jobs”, was conducted in United Kingdom with data since 1975. It focuses on the current trend of labor market polarization, with growing employment in high-income jobs and low-income manual occupations. The model shows that 30% of market polarization comes from technology changes (Goos & Manning, 2007).As we can see from literature, there isn’t a clear view on the effect of technology on unemployment as authors are divided in two different groups.

This is a main issue that still has to be paid attention given that it is a complex problem as unemployment can be affected by many other factors as business cycle, financial crisis, government politics etc. What we can say for sure is that technology has been changing our lives and of course the economy and the structure of jobs.


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