Technological impact from Artifical Intelligence on Labor market in EU

Mentor: Students:

Prof. Rant Vasja Franjić Tina 19190094

Subject: Plivčić Nejra 19191339

Economic Policies of the EU Stojanovikj Aleksandra 19189466

Ljubljana, January 2018.

> Impact of Advanced Technologies on the Labour

Market in the Future and Implications for the EU <

Table of content

1. Introduction …………………………………………………………………………………………………………….. 1

2. Technological changes due history……………………………………………………………………………… 3

2.1. Impact of digitalization on employment ……………………………………………………………….. 4

2.2. Traditional businesses and industries …………………………………………………………………… 4

2.3. Digital Revolution ………………………………………………………………………………………………. 6

2.4. Level of digitalization in the EU ……………………………………………………………………………. 7

3. Labour Demand ……………………………………………………………………………………………………….. 9

3.1. Preparing for tomorrow’s world of work …………………………………………………………….. 10

3.2. Managing skills supply for tomorrow’s world of work ………………………………………….. 11

4. Labor Market Challenges …………………………………………………………………………………………. 13

4.1. Employment challenge. …………………………………………………………………………………….. 13

4.2. Inequality challenge. ………………………………………………………………………………………… 14

4.3. Productivity challenge. ……………………………………………………………………………………… 15

5. How to positively affect the future of work ……………………………………………………………….. 16

6. Conclusion …………………………………………………………………………………………………………….. 18

References …………………………………………………………………………………………………………………… 19

Executive summary

Technological movements and innovation over time has brought immense benefits for

individuals and economies across the globe for many reasons. One of the effects of technological

advancement is how it continues to modify the labor market. It is the most important factor

driving improvements in living standards. Innovation is essential for dealing with grand societal

challenges, and is the key in maintaining a competitive edge in the global competition.

The question is, does the technology increases employment rates or it dampens employment

opportunities for the present and future generations.

Lower-skilled workers are the most harmed by technological developments, as robots and

computing advancements regularly replace workers undertaking repetitive tasks which are not

asking for special skills. Unemployment is on the rise within sectors that are mainly based

around administration, service work and even within construction. However, at the same time

employment opportunities are on the surge in labor whose skills are complementary to new

technology, for instance, workers skilled and educated in IT and engineering related disciplines.

In terms of employment, technology is benefitting those with greater analytical, problem solving

and creative skills.

From our point of view the following literature suggests that the main negative impacts of

technology on the labor market can be summarized as more inequality and, potentially, more

unemployment. The research that we did demonstrates a strong relationship between

technological change and higher inequality. The importance of these impacts for policymakers is

also obvious: if left unchecked, they could put existing societal structures under severe stress,

and might threaten political stability in European countries. For a better understanding of these

trends it is important to separate them into more specific impacts.

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1. Introduction

The world of work is in a condition of transition, which is causing extensive anxiety—and with

good reason. There is developing polarization of labor-market opportunities among the high- and

low-skilled occupations, unemployment and underemployment particularly among youngsters,

stagnating salaries for a large proportion of households, and income disparity. Migration and its

consequences on jobs have turned into a delicate political issue in many advanced economies.

From Mumbai to Manchester, public debate rages about the eventual fate of work and whether

there will be enough jobs to profitably utilize everybody.

The advancement of automation empowered by technologies, including robotics and artificial

intelligence brings the guarantee of higher productivity (and with productivity, economic

growth), increased efficiencies, security, and convenience. Apart from that, these technologies

additionally bring up difficult questions about the broader impact of automation on jobs, skills,

wages, and the nature of work itself.

Numerous activities that workers complete today have the possibility to be automated. In the

meantime, job-matching sites, for example, LinkedIn and Monster are changing and growing the

way people search for work and companies identify and recruit talent. Independent workers are

progressively offering their services on digital platforms, including Upwork, Uber, and Etsy and,

in the process, challenging conventional ideas about how and where work is undertaken. For

policy makers, business pioneers, and workers themselves, these movements make extensive

vulnerability, alongside the potential advantages.

Unmistakably, we are still in the beginning periods of how sectors and organizations utilize

digital technologies, and there is considerable unevenness. From nation to nation, as well, there

are significant divergences. In general, for instance, we appraise that the United States has

caught just 18 percent of its potential of advanced technologies, while Europe has caught only 12

percent. Emerging economies are significantly further behind, with nations in the Middle East

and Brazil captures less than 10 percent of their digital potential.

More than half the world’s population are still offline, constraining the

possibility to profit from digital

Fast technology adoption can open tremendous financial value, even as it suggests a real

requirement for retraining and redeployment of labor. In India, for instance, digital technologies

provide the foundation for numerous developments that could contribute $550 billion to $1

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trillion of economic impact for every year in 2025. Nonetheless, the value of digitization that is

captured relies upon what number of individuals and businesses approach it. More than four

billion individuals, or over a portion of the total population, is still offline. Around 75 percent of

this offline population can be found in 20 countries, including Bangladesh, Ethiopia, Nigeria,

Pakistan, and Tanzania, and is disproportionately rural, low wage, elderly, uneducated, and

female. The benefit of connecting these people is noteworthy, and as they enter the worldwide

digital economy, the world of work will change in principal ways and at a remarkable pace.

Access to the innovation alone is not sufficient; even in nations where an extensive dominant

part of the population has access, the literacy and skills needed to capture digital gains are

sometimes constrained.

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2. Technological changes due history

Worries that technological progress makes many jobs redundant are not new. Technical change

in the beginning of the Industrial Revolution had led to a series of protests against the

introduction of new technologies. One of the best known examples involved artisanal textile

workers in the late 18th and early 19th century England, who took to destroying new labor–

saving machines. These machines threatened their jobs and livelihood since they could be

operated by a smaller number of lower-skill and lower paid workers. The protesters were named

the Luddites after Nedd Ludd who supposedly smashed two

textile knitting machines in 1779. Since then, the word ‗Luddite‘

has gained a broader (and derogatory) meaning to denote anyone

who is opposed to technical progress. We know that, over time,

the Industrial Revolution brought about large improvements in

living standards and expanded employment opportunities for

workers. However, its effect on those textile artisans was

probably negative – at least in the short term.

The impact of technological progress on unemployment has continued to regularly attract

attention from observers and policymakers. Periods of increased interest seem to coincide with

increases in the unemployment rate, for example, during the Great Depression in the 1930s.

British economist John Maynard Keynes popularized the term ‗technological unemployment‘ in

his essay ‗Economic Possibilities for our Grandchildren‘, in which he wrote: ‗We are being

afflicted with a new disease of which some readers may not yet have heard the name, but of

which they will hear a great deal in the years to come – namely technological unemployment.

This means unemployment due to our discovery of means of economizing the use of labor

outrunning the pace at which we can find new uses for labor. But this is only a temporary phase

of maladjustment.‘ (Keynes, 1930.)

Examples of technology replacing human workers are indeed sometimes highly visible.

Automatic kiosks at airports, hotels and supermarkets are increasingly common. ATMs have

replaced most bank cashiers. Telephone information lines at banks and other service providers

now often employ software in the form of interactive voice response systems instead of people.

Driverless cars are rapidly emerging as a new exciting technology which might make the skills

of many workers redundant in a not too distant future.

Younger and less skilled workers in the peripheral regions of any country are much less likely to

be at work, and this is likely to remain the case. On the other hand, it is likely that workers in

sectors of non-tradable services that can generate income are safer. It is difficult for legislators

and others to foresee what may or may not happen in the medium or long term, so it is probably

better for them to ensure that there is adequate infrastructure and support institutions, along with

the will to act in the face of shock. Policymakers must base their judgments on a broader range

of performance measures, but without per capita growth, any improvement or adjustment to the

inevitable pressures that press against less skilled labor will be much more difficult to achieve.

2.1. Impact of digitalization on employment

Our work focuses mostly on the negative impacts of technological change on the labor market.

However, it is important to see through and keep in mind the bigger picture – the importance and

benefits of technological innovations, which have been essential to our progress. We are

reviewing some important facts about technological change. Standards in Western Europe have

increased tremendously over the last 100-150 years. Total economic output per capita in Western

Europe grew approximately sevenfold between 1900 and 2010 despite the two world wars and

many recessions that occurred in this period. While economic statistics may sound dry and

abstract, such an indicator as the infant mortality rate can be easier to comprehend. In 1900 only

one country in the world, Sweden had an infant mortality rate below 10%, while in many other

Western European countries it was above 20% (e.g., Germany). By 2010, this rate was below

0.5% in all Western European countries. In a period of slightly more than 100 years, the chances

of dying for infants have declined by at least 40 times in many European countries, hence saving