Written by Mihalis Kritikos,
The relationship between new technologies, employment and inequality has gained a lot of attention recently. One reason for this interest is alarming reports about the possible negative consequences for employment of the widespread use of new information and communication technologies (ICTs), including machine learning, digitalisation of production, robotics and automated vehicles. What policy responses could answer this challenge?
Last week, the European Parliament’s STOA (Science and Technology Options Assessment) Panel published the results of its study on ‘The impact of new technologies on the labour market and the social economy’. The study was requested by Georgi Pirinski (S&D, Bulgaria) and carried out by the Austrian Institute of Technology (AIT), under the management of the Scientific Foresight Unit (STOA).
The study investigated the relationship between innovation, new technologies, employment and inequality. Drawing on the existing literature, as well as experience from previous technological revolutions, the author concludes that we can be optimistic about the future. Innovation is labour-friendly: it destroys, but also creates employment.
As part of this project, STOA organised a workshop on 11 October 2016, chaired by Georgi Pirinski. The workshop provided additional input and discussed the topics and findings of the report with the audience. The race between job creation through product innovation and job destruction through process innovation was won in the past by the job-creating effects of innovation. The study does not envisage that digitalisation will lead to mass unemployment; however, it points out that, because of the skill-biased nature of technological change, the costs of digitalisation are unevenly distributed and are borne in particular by low-skilled workers, who face a higher risk of job displacement. Occupations with a high share of routine tasks, particularly in the service industries, are also at risk. Therefore, the challenge of the future lies in coping with rising inequality as a result of technological change.
The study proposes seven policy options, each expected to contribute to alleviating at least one challenge or barrier. Among them, the need to invest in digital education; in non-routine skills; in R&D at all levels in areas, such as ICTs, including measures to increase the available amount of venture capital, as well as in upgrading Europe’s internet infrastructure so as to maintain a balance between cities and rural areas, which may lag behind in terms of infrastructure. Moreover, ensuring equal access to connectivity and launching a European Union (EU) programme for broadband on a European scale could be a first step in that direction. The study also highlights ‘flexicurity’ as an important part of the European employment strategy, which is essential in helping future labour market policies cope with technological changes and the rise of new types of self-employment, such as platform work or ‘gigs’ that also call for new employment regulations. Finally, the study proposes reducing working time and strengthening EU and international cooperation on achieving some convergence on taxing the super-rich by imposing higher income taxes and introducing a stronger progression in income taxes or wealth taxes. The policy options are summarised in the Options Brief.
To summarise, it is neither desirable nor feasible to stop digitalisation, but many policy options are available to influence and steer the process by investing in education, infrastructure and R&D, and adapting labour legislation and tax and social-security policies to digitalisation. Perhaps most important is to think of digitalisation not as a threat, but as a chance to increase welfare, opportunities and social cohesion for all Europeans.