Man Versus Machine: Automation, Market Structure and Skills

Abstract

The paper asks a simple question. If individuals demand products from the firms in the economy and supply their skills concomitantly to the firms, then why should there be skill gap in the society, i.e., mismatch between skills that individuals possess and firm’s demand. After all, in a decentralised economy prices of various products and skill specific wages should adjust to ensure that there is match between demand and supply of skills. The paper suggests that there are three factors that keep skill gap alive. The first two are the web of dynamic complementarities in the way human beings acquire skills and the way they invent new technologies. The third factor is the lack of competition in the product market that accompanies period of accelerated technical change. The papers looks at the impact automation and globalisation has had in opening up the skill gap and suggest policies that would help close the skill gap. With accelerated changes in technology and concomitant social changes, it is ever so more important to have a learning environment that allows workers and citizens in the society to learn and adapt flexibly.

Keywords: Automation, Skill Gap, Globalisation, Market structure, Education, Schooling

JEL Classification: D43, F15, J24, O33