Content area
Full Text
Economic theory suggests that the impact of technology on employment is the outcome of two opposing forces. On the one hand, innovations in process, such as the introduction of labour-saving machinery and equipment, reduce the demand for labour per unit of output. On the other hand, they improve productivity, allow lower prices, and thereby increase wages, profits and incomes, which are then translated into higher demand for workers. At the same time, innovations in product -- the creation of new products or services -- directly increase employment, as they increase the demand for these new products.
The question therefore of whether, on balance, technology creates more jobs than it destroys is one of whether the indirect -- compensating -- beneficial effects through higher productivity and incomes are stronger than the job-displacement effects of the initial introduction of new technologies. History suggests that this pay-off between loss and gain has always obtained: in the industrialised world, although some unemployment has always accompanied new technology, the additional jobs created directly and indirectly have been sufficient not only to replace those lost but also to expand employment substantially.
Time and again, subsequent developments' have confounded predictions of an emergence of large-scale technological unemployment. In the 1820s, for example, many commentators were arguing that the increased productivity from the introduction of machinery in the United Kingdom would reduce employment. Over the half-century that followed, both wages and employment increased. Similarly, fears about widespread job losses in the United States from the invention of the computer in the 1940s have been confounded by higher wages and no appreciable rise in unemployment.
But the beneficial long-term effects of technology on employment must not overshadow current concerns about adverse effects in the short term, especially in individual sectors, regions and occupations. Whatever confidence one may have in the long-term adjustment process, both history and current developments suggest that short-term dislocations can be substantial -- especially because adjustment takes rime, and the industries and types of workers that will benefit from technical change are different from the ones that lose from it. Moreover, the events of the past are not always the best guide for the Future. Indeed, many well-informed observers doubt whether even the long-term result will be beneficial and cite the...