Transcript Link:Presentation of Marco Vivarelli

TECHNOLOGY, EMPLOYMENT AND SKILLS
Marco Vivarelli
Professor, Università Cattolica del Sacro Cuore, Milano
Professorial Fellow UNU-MERIT, Maastricht
Research Fellow IZA, Bonn
STOA workshop
How is digital technology changing the labour market?
11 October 2016, European Parliament, Brussels
An old issue: Ned Ludd and Captain Swing against
textile and threshing machineries
Captain Swing by Eric Hobsbawm and George Rudé, New york, Pantheon Books, 1968
TODAY ALARM…
•The pervasive diffusion of ICT and automation has led to a dramatic adjustment
of employment, both in quantitative (employment levels) and qualitative terms
(skills).
•Recently, the arrival of 3D printing, self-driving autonomous cars (Tesla, Apple,
Google) and agricultural robots has raised again a widespread fear of a new
wave of ‘technological unemployment’.
•Moreover, not only agricultural and manufacturing employment appears at risk,
but employees in services - including cognitive skills - are no longer safe (see, for
instance, how Uber - just a software tool - is fully crowding out taxi companies).
•Once called “Skill-Biased Technological Change” (SBTC), now technological
change appears to displace routinized jobs, including middle and high skills.
•Finally, these recent trends have interlinked with the financial and economic
crises and with the slow recovery afterwards, often showing a jobless nature
(OECD, 2016).
RICARDO’S SURPRISE
“….the opinion, entertained by the labouring class, that the
employment of machinery is frequently detrimental to their
interests, is not founded on prejudice and error, but is conformable
to the correct principles of political economy” (Ricardo, 1951, vol 1,
p. 387; third edition, 1821)
However, technological unemployment is seen by the classical and
contemporaneous economists as an exception, occurring only when
production does not grow.
Otherwise, a “compensation” can occur through price and income
mechanisms fully operating in a competitive market: indeed,
technological progress should involve decreasing prices, increasing
profits and increasing incomes, in turn boosting demand,
production and employment.
HOWEVER, ECONOMIC THEORY PUTS
FORWARD A TRICKLE-DOWN
«FAIRY TALE»
“This neo-classical general equilibrium framework can be said to
correspond most closely to present-day traditional economic views on
technical change and employment. Technological change may indeed
result in some temporary unemployment, but with efficiently operating
labour and capital markets there is no basic economic problem arising
from the introduction of new technology”
(Freeman, C. and Soete, L., Work for All or Mass Unemployment,
London: Pinter, 1994, p.25)
In the real world, non competitive markets, price rigidities, pessimistic
expectations may severely hinder and delay the compensation of the
initial job losses.
In summary, economic theory is inconclusive and empirical studies are
necessary.
E
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NARROW-MINDED OPTIMISTIC
ECONOMISTS VS DOOMSTERS
Keynes, J.M., 1930, “Economic Possibilities for our Granchildren”,
Leontief and Duchin, 1986,“The future Impact of Automation on Workers”,
Rifkin, J. 1995, “The End of Work”,
Brynjolfsson and McAfee, A., 2011, “Race Against the Machine: How the
Digital Revolution is Accelerating Innovation, Driving Productivity, and
Irreversibly Transforming Employment and the Economy”: the root of the
current employment problems is not the Great Recession, but rather a
“Great Restructuring” characterized by an exponential growth in
computers’ processing speed having an ever-bigger impact on jobs, skills,
and the whole economy.
• Frey and Osborne, 2013, “The future of employment: how susceptible are
jobs to computerisation?”, predict that 47% of the occupational categories
are at high risk of being automated, including a wide range of
service/white-collar/cognitive tasks such as accountancy, logistics, legal
works, translation and technical writing, etc.
ECONOMIC THEORY IS INCONCLUSIVE.
EMPIRICALLY:
I
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P
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&
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PROD
PROD
&
PROC
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PROC
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JOB
CREATION
JOB
DESTRUCTION
MY KEY FINDINGS
• R&D and patents foster labor-friendly product innovation that leads
to job creation.
• Product innovation may imply the emergence of new firms and new
sectors and thus new jobs.
• Price and income compensation mechanisms can counterbalance
the initial displacement of workers that occurs following process
innovation.
• Industrial and innovation policies that support R&D and product
innovation, especially in high-tech sectors, can foster job creation.
• The job-creation impact of innovation is often limited to product
innovation and to the high-tech sectors.
Therefore:
• Safety nets are necessary for the possible job losses due to
process innovation in non-high-tech sectors.
THE CRUCIAL ROLE OF SKILLS
A NUMERICAL EXAMPLE
LEVELS OF FULL
EMPLOYMENT
TECHNOLOGY AT TIME 0
FULL EMPLOYMENT
EQUILIBRIUM
OUTPUT: 120
OUTPUT/LABOUR: 1
SKILLED/UNSKILLED: 1:1
EMPLOYMENT
TECHNOLOGY AT TIME 1
(LABOUR-SAVING AND SKILL-BIASED)
OUTPUT COMPENSATION VIA
PRICE AND INCOME MECHANISMS
OUTPUT: 120
OUTPUT/LABOUR: 2:1
SKILLED/UNSKILLED: 2:1
OUTPUT: 180
OUTPUT/LABOUR: 2:1
SKILLED/UNSKILLED: 2:1
120
60
90
SKILLED: 60
60 EMPLOYED
40 EMPLOYED
20 UNEMPLOYED
60 EMPLOYED
(MAXIMUM LEVEL)
UNSKILLED: 60
60 EMPLOYED
20 EMPLOYED
40 UNEMPLOYED
30 EMPLOYED
30 UNEMPLOYED
0
60
30
UNEMPLOYMENT
MY KEY FINDINGS
• Consistently with previous literature, R&D expenditures turn
out to be related to an increase of employees with at least
tertiary education; in contrast, a non-significant effect on
employees with low educational degree is detected.
• R&D expenditures result to be significantly and positively
related to employment of high-skilled non-manual employees
(high-skilled white-collars); in contrast, R&D expenditures
turned out to be related to a decrease of manual low-skilled
employees.
• R&D expenditures showed a positive and significant impact on
non-routine jobs; in contrast, R&D expenditures may involve
a decrease in routine jobs and tasks.
SOME REFERENCES
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Vivarelli, M., 1995. The Economics of Technology and Employment: Theory and Empirical
Evidence. Aldershot: Elgar.
Vivarelli, M., Pianta, M. (eds), 2000. The Employment Impact of Innovation: Evidence and
Policy. London: Routledge.
Piva, M., Vivarelli, M., 2002. The skill bias: Comparative evidence and an econometric test.
International Review of Applied Economics, 16, 347-357.
Piva, M., Vivarelli, M., 2005. Innovation and employment: Evidence from Italian microdata.
Journal of Economics, 86, 65-83.
Piva, M., Santarelli, E., Vivarelli, M., 2005. The skill bias effect of technological and
organisational change: Evidence and policy implications. Research Policy, 34, 141-157.
Bogliacino, F., Vivarelli, M., 2012. The job creation effect of R&D expenditures. Australian
Economic Papers, 51, 96-113.
Bogliacino, F., Piva, M., Vivarelli, M., 2012. R&D and employment: An application of the
LSDVC estimator using European data. Economics Letters, 116, 56-59.
Vivarelli, M., 2013. Technology, employment and skills: an interpretative framework.
Eurasian Business Review, 3, 66-89.
Vivarelli, M., 2014. Innovation, employment and skills in advanced and developing
countries: A survey of economic literature. Journal of Economic Issues, 48, 123-154.
Van Roy, V., Vertesy, D., Vivarelli, M., 2015. Innovation and employment in patenting firms:
Empirical evidence from Europe. IZA Discussion Papers 9147, Bonn.
THANK YOU