Techno-Unemployment?

Abstract

The objective of this paper is to examine the impact of information and communication technologies on employment. Recently concern has increased about the impact of accelerating development of artificial intelligence and automation on jobs. This issue is timely as some countries are still coping with high levels of unemployment, even after recovering from the “great recession.” As well, middle and working class incomes have stagnated for decades.

Given this setting we wish to answer the following questions: (1) What are the factors that lead to the elimination of some types of jobs through ICTs and automation and which types of employment are most vulnerable? (2) Are new jobs being created fast enough to absorb the freed workforce into higher quality employment opportunities (i.e. is a process of creative destruction unfolding)? (3) Are public policies required to mitigate these adjustments and if so, which policies?

Emerging research is beginning to show that current information technologies have greater potential than ever before to displace numerous people from their jobs and contribute to greater income inequality. Some observers argue that this should not be a concern because, as in previous technological revolutions, the economy will be able to recover and those displaced will be able to find other, often better and more rewarding jobs, including innovative forms of employment in the growing sharing economy. Arguments on this side are about the unlimited human wants that lead to innovation and the emergence of new firms that will be able to employ those displaced.

Others are more skeptical and believe that this time is different; that high-tech firms generate a lot of wealth but not a lot of employment. They feel that the less skilled will be left behind and will experience substantially lower wages, due to new competition from computers and other technologies that need to be programmed once in order to outperform a human at the same task. Recent OECD data shows that particularly medium skill levels are negatively affected, whereas there is growing demand for low and high skills.

In this paper we review the theoretical research on the effects of advanced ICTs on employment and develop a model of the effects of ICTs on employment. The paper concludes with policy recommendations. These include the need for experimentation with new approaches involving distribution of income.

Keywords: ICTs, unemployment, income and wealth distribution, technological advance

JEL Classification: D31, E24, O33