by Julian R. Betts, University of California in San Diego, under contract with Industry Canada, 1998
Summary
The paper studies the interaction between new technologies and the labour market. The central focus of the paper is an analysis of how new computer-related technologies have affected wages, employment and thedemand for skilled workers relative to less-skilled workers.
The first section provides a non-technical discussion of the relevant economic theory. The predictions one can make based on this theory vary widely depending on the type of technological change considered. To give just oneexample, a firm which adopts a labour-saving technology may in fact increase employment and wages as a result. Any job losses may occur at other firms in the industry which fail to innovate. Employment in other industries couldeither rise or fall, as the effects of innovation in one industry alter the demand for labour, raw materials and other inputs across the economy.
The second section analyzes the impact of recent computer-based innovationson employment, wages, and the demand for skilled workers relative tounskilled workers. Evidence from a number of sources suggests that technologicalchange has not produced a significant decline in employment in Canada.If anything, technology-adopting firms seem to increase both wages andemployment relative to non-innovating firms in the same industry. Studiesbased on data for the United States and France have yielded similar results. Itappears that recent technological advances related to microelectronics haveincreased skill requirements, contributing to a significant widening of the wagegap between university-educated workers and those with a lower level of educationalattainment in the United States; a similar but much smaller increasein the wage gap between these categories of workers is observed in Canada.
The third section considers the extent to which the characteristics of thelabour market have impeded the rate of technological change. Several surveysof Canadian firms suggest that a lack of sufficiently trained or educated workersslowed the rate at which firms adopted microelectronics-based technologiesduring the 1980's.
The fourth and fifth sections outline probable trends in technology overthe next fifteen years, as well as strategies for coping with related changes.Research suggests that massive unemployment resulting from technologicalprogress is very unlikely, given the gradual rate at which micro-electronic technologieshave been adopted. But technology will continue to affect the labourmarket in important ways. In particular, the rate of skills obsolescence will keeprising and the demand for skilled workers is likely to continue to grow.
A number of policies aimed at dealing with technological change areproposed. For youth, measures are needed to strengthen the school-to-worktransition. High and uniform educational standards across Canada could domuch to ensure that students are well prepared for the labour market. Otherpolicies likely to help youth are increased expenditures on computer training inhigh school, an overhaul of vocational education, and a better interface betweencommunity colleges and local businesses. An important role for the federal governmentwith regard to the last of these proposed policies would be to encouragethe development of national standards for a series of certificate programs.
A number of initiatives are suggested to reduce the adverse impact oftechnological change on older workers, including experience-based unemploymentinsurance premiums and better support for the community college system.
Cooperation between the private sector, government and postsecondaryinstitutions is likely to produce the most effective responses to changing skillsneeds and structural unemployment. The key to success is that local educationalestablishments obtain constant feedback from local businesses to ensurethat courses and programs keep pace with the requirements of technology.Given evidence that Canadian industry adopted microelectronics at a slightlyslower pace than other developed countries in the 1980's, and that a lack ofskilled workers is often mentioned by Canadian firms as an obstacle to innovation,such tripartite policies could succeed not only in training young workersand re-training older workers in the skills most in demand, but they might alsoincrease the overall rate of innovation and productivity growth in theCanadian economy.