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Policy Brief: New Evidence on the Effect of Technology on Employment and Skill Demand

Author

Listed:
  • Hirvonen, Johannes
  • Stenhammar, Aapo
  • Tuhkuri, Joonas

Abstract

How do new technologies such as robots affect the demand for work and skills? The common idea is that new technologies, especially in manufacturing, replace jobs and increase the demand for highly skilled workers. However, there is little concrete evidence for or against this idea. This brief presents the findings from a recent study by MIT, Etla, and Labore on the effects of new technologies on employment and skill demand in Finnish manufacturing. We use technology investment subsidies to compare otherwise similar firms, some of which received a subsidy and others not. The results show that technologies did not destroy jobs or increase the share of highly skilled workers in the manufacturing firms of our sample. New technologies led to increases in employment, but the average level of education, occupational distribution, cognitive abilities, and personality traits of the employees in our sample firms did not change as a result of a new technology investment. We find that these firms typically do not use new technologies to replace workers with machines but to do new things: make new products flexibly and improve their quality and the reliability of delivery. One explanation for this is that a significant share of Finnish manufacturing firms specialize in flexible high value-added production, where the role of technology is not primarily to displace human labor but to improve the competitiveness of the firm by other means.

Suggested Citation

  • Hirvonen, Johannes & Stenhammar, Aapo & Tuhkuri, Joonas, 2022. "Policy Brief: New Evidence on the Effect of Technology on Employment and Skill Demand," ETLA Brief 108, The Research Institute of the Finnish Economy.
    • Handle: RePEc:rif:briefs:108
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    Citations

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    Cited by:

    1. Toon Van Overbeke, 2023. "Conflict or cooperation? Exploring the relationship between cooperative institutions and robotisation," British Journal of Industrial Relations, London School of Economics, vol. 61(3), pages 550-573, September.
    2. Alex Chernoff & Gabriela Galassi, 2023. "Digitalization: Labour Markets," Discussion Papers 2023-16, Bank of Canada.
    3. Heyman, Fredrik & Olsson, Martin, 2022. "Long-Run Effects of Technological Change: The Impact of Automation and Robots on Intergenerational Mobility," Working Paper Series 1451, Research Institute of Industrial Economics, revised 29 Jun 2023.
    4. Andreas Baur & Lisandra Flach & Isabella Gourevich & Florian Unger, 2023. "North-South Trade: The Impact of Robotization," CESifo Working Paper Series 10865, CESifo.
    5. Arntz, Melanie & Blesse, Sebastian & Doerrenberg, Philipp, 2022. "The end of work is near, isn't it? Survey evidence on automation angst," ZEW Discussion Papers 22-036, ZEW - Leibniz Centre for European Economic Research.
    6. Paulo Bastos & Lisandra Flach & Klaus Keller, 2023. "Robotizing to Compete? Firm-level Evidence," Rationality and Competition Discussion Paper Series 467, CRC TRR 190 Rationality and Competition.

    More about this item

    Keywords

    Technology; Labor; Skills; Industrial policy;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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