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A Possible Relationship Between the Inclusive Nature of the Modern Labour Market and Technological Progress

A Possible Relationship Between the Inclusive Nature of the Modern Labour Market and Technological Progress Economy Near Us (LI)

The article aims to bring to the attention or debate a possible relationship between the inclusive nature of the modern labour market and technological progress. From this relationship, labour market policy options arise that would favour inclusion through the use of technology in the current context. There are many definitions, approaches and methodologies for measuring the inclusive, easily accessible labour market thanks to the internet (coming from EU, OECD, ILO etc). We may add the specialized literature from experts and researchers, each and every one striving to fully capture the concept. This brief article tries its own answer to the following questions:

- What role does technology play in the labour market today?

- What public policy measures could be proposed to capitalize on the impact of technology on the labour market?

In formulating the opinion, we took into account two criteria that contribute to the inclusive nature of the labour market, namely: employment opportunity and job performance. I believe that access to the labour market must be open to anyone who wants a job and in full accordance with their skills. Also, individual performance and productivity at micro and macroeconomic level must reflect the results obtained, meaning that the level of wages should be correlated with the result, without discrimination based on age, race, religion, gender or other possible forms of discrimination.

Technology and labour

The introduction of a new technology has always triggered massive structural changes in economies and the labour market. The concern for employment in line with the technological level has gone down in history, from agriculture to industry and from industry to services. As technology, especially automation and robotics promised greater production and the possibility of faster consumption, the workforce was replaced by machines. The phenomenon has gained momentum, especially when the cost of implementing a new technology has been low. People were quickly replaced by machines, especially hazardous (e.g., mining), dirty or routine jobs (both in production and in offices). It has been known since the discovery of the steam engine or electricity (since the first Industrial Revolution) that technological progress has led to increased productivity, which can be considered a first micro and macroeconomic benefit. Economic growth favours and is favoured by investments in infrastructure, health, education, which lead to higher living standards, to well-being.

But the impact on the labour market is not entirely positive, with Keynes being the first major economist to point to the possibility of technological unemployment and long-term unemployment when human labour (factor of production) is replaced by another factor of production (machine). Despite the disruptions, it has not been possible to prove a negative impact on employment or such a persistent increase in long-term unemployment as to negate the benefits of technological progress. In reality, technology cannot provide total or perfect replacements for work, rather it partially eliminates or completes certain work tasks with primarily beneficial effects on productivity. Increasing productivity affects the supply of goods and services and causes their prices to fall. Consumers will respond by increasing demand, which will boost production, which will lead to new jobs. Sometimes, in production, productivity growth and price decline occur in one industry, new technologies increase consumer incomes and increase demand (and employment) in another industry (or even more, simultaneously), thus impacting the structure of the labour market.

Globalization has led to increased trade, increased exports and thus job creation - generally high-skilled and well-paid jobs (e.g., in the EU one out of seven jobs is supported by exports, and in Romania one out of six). At the same time, increased competition between companies, led to job losses and costs for reorientation or retraining.

The European Globalisation Adjustment Fund (EGF) is a special financial instrument to support workers whose jobs have been terminated and made redundant (e.g., the case of Nokia, including in Romania at the factory in Cluj, and the telephone exchanges in Italy or the supermarkets in Greece). The EGF co-finances up to 60% of employment policies for re-employment or business creation. Funded projects include education and training, career counselling, and job search assistance, mentoring, and business start-ups.

The future(s) of job(s)

Artificial intelligence (AI) is built on large databases, algorithmic progress and the power of data processing and storage. This AI added to the machines makes the robots even more sophisticated, the robots become more productive, the automation is accelerated. An automated job is a job for which current technology can provide a perfect substitute, i.e., if the factors of production can replace each other in the production process (e.g., autonomous car, driverless car, supermarket and cashiers).

Of course, it will move quickly from the use of labour to the use of machines if the price of capital falls below that of labour. Still, there is personal interaction needed (e.g., in the hospitality industry, HORECA, the waiters have been replaced by robots in some places, but it is unlikely that the real value of the interaction with the waiter offering the restaurant meal experience can be replaced at important events or luxury restaurants) or there are services that by their nature remain highly personalized, if a certain dose of creativity is required or if the processes cannot be standardized. In the future, the most exposed to substitution risks will be low-complexity jobs, the most protected will be those of high complexity, and those of medium complexity will undergo major transformations in human skills.

The Internet (through the influence on the consumer, the increase in demand for services and products) and the accelerated growth in the number of jobs needed to meet the demand for products and services online, fuels the work on digital platforms, making it a peculiarity of the present in terms of technological progress. In this regard, the major challenges are related to the regulation of these activities, the working conditions provided and the occupational health and safety of workers (including programmers working for the creation, maintenance and development of these platforms).

The pandemic trigger

The crises triggered by the COVID-19 pandemic have highlighted vulnerabilities, especially in the workforce, and hastened manifestations that once again show that there is great uncertainty about the pace and extent of future labour market disruptions. The effects of the pandemic have been devastating, and governments have been in a position to take measures of wage subsidies and income support to alleviate job losses. In the pandemic, the Internet and automation emerged as solutions to facilitate social distance and long-distance work, thus providing protection for life and income. But the pandemic also provides insight into how polarization has affected the labour market, proving a digital skills pandemic. For those with lower levels of education, the effect of COVID-19 on employment was much more severe than for those with higher levels of education. The effects of COVID-19 even seem to mimic some of the effects of automation: by creating an inequality in productivity that largely reflects the level of education of workers.

COVID-19 has shown that many low- and middle-income countries are willing and able to rapidly reform their education systems in response to a crisis. Successful states have adopted reforms very quickly to adapt to school closures and social distancing, with an emphasis on the quality and equity of education. The pandemic has also provided an overview of what labour market automation can do if education outcomes are poor. If education systems are strong enough, they can meet the demand of employees to acquire skills to adapt to automation disruptions. If they are not strong enough and the supply of these skills is limited or less resilient, greater wage inequality will result. In turn, more expensive social programs will be needed to compensate for this inequality, and no one will be able to obtain the productivity benefits of automation.

The European Parliament has voted to update the EGF rules in 2021 and to extend the scope to provide assistance in the event of major restructuring related to digitization, automation and the transition to a low-carbon economy.

In conclusion, in increasing employment and reducing unemployment, technological progress can be approached as an opportunity, and the role of labour market policy is to create favourable circumstances, provide opportunities and exploit the potential of the workforce, especially through education and the training of new skills.



The Market For Ideas Association

The Romanian-American Foundation for the Promotion of Education and Culture (RAFPEC)

Amfiteatru Economic