Digitalization and the Future of Work: Macroeconomic Consequences

Handbook of Labor, Human Resources and Population Economics, by Klaus F. Zimmermann (Editor-in-Chief).

ZEW - Centre for European Economic Research Discussion Paper No. 19-024, 6/2019

27 Pages Posted: 3 Jul 2019

See all articles by Melanie Arntz

Melanie Arntz

ZEW – Leibniz Centre for European Economic Research

Terry Gregory

IZA Institute of Labor Economics; ZEW – Leibniz Centre for European Economic Research

Ulrich Zierahn

ZEW – Leibniz Centre for European Economic Research - Labour Markets, Human Resources and Social Policy Department

Multiple version iconThere are 2 versions of this paper

Date Written: 2019

Abstract

Computing power continues to grow at an enormous rate. Simultaneously, more and better data is increasingly available and Machine Learning methods have seen significant breakthroughs in the recent past. All this pushes further the boundary of what machines can do. Nowadays increasingly complex tasks are automatable at a precision which seemed infeasible only few years ago. The examples range from voice and image recognition, playing Go, to self-driving vehicles. Machines are able to perform more and more manual and also cognitive tasks that previously only humans could do. As a result of these developments, some argue that large shares of jobs are “at risk of automation”, spurring public fears of massive job-losses and technological unemployment.

This chapter discusses how new digital technologies might affect the labor market in the near future. First, the chapter discusses estimates of automation potentials, showing that many estimates are severely upward biased because they ignore that workers in seemingly automatable occupations already take over hard-to-automate tasks. Secondly, it highlights that these numbers only refer to what theoretically could be automated and that this must not be equated with job-losses or employment effects – a mistake that is done often in the public debate. Thirdly, the chapter develops scenarios on how digitalization is likely to affect the German labor market in the next five years and derives implications for policy makers on how to shape the future of work. Germany is an interesting case to study, as it is a developed country at the technological frontier. In particular, the main challenge will not be the number, but the structure of jobs and the corresponding need for supply side adjustments to meet the shift in demand both within and between occupations and sectors.

Keywords: Automation, Digitalization, Unemployment, Inequality

JEL Classification: J23, J31, O33

Suggested Citation

Arntz, Melanie and Gregory, Terry and Zierahn, Ulrich, Digitalization and the Future of Work: Macroeconomic Consequences (2019). Handbook of Labor, Human Resources and Population Economics, by Klaus F. Zimmermann (Editor-in-Chief). , ZEW - Centre for European Economic Research Discussion Paper No. 19-024, 6/2019, Available at SSRN: https://ssrn.com/abstract=3413653 or http://dx.doi.org/10.2139/ssrn.3413653

Melanie Arntz (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Terry Gregory

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

HOME PAGE: http://https://sites.google.com/view/terrygregory

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
Mannheim, 68161
Germany

HOME PAGE: http://https://sites.google.com/view/terrygregory

Ulrich Zierahn

ZEW – Leibniz Centre for European Economic Research - Labour Markets, Human Resources and Social Policy Department ( email )

P.O.Box 10 34 43
D-68034
Germany

HOME PAGE: http://www.zew.de/MA601-1

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