Archived — Canada in the 21st Century: Paper Number 7: The Implications of Technological Change for Human Resource Policy

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 the demand 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 one example, 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 could either 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 innovations on employment, wages, and the demand for skilled workers relative to unskilled workers. Evidence from a number of sources suggests that technological change has not produced a significant decline in employment in Canada. If anything, technology-adopting firms seem to increase both wages and employment relative to non-innovating firms in the same industry. Studies based on data for the United States and France have yielded similar results. It appears that recent technological advances related to microelectronics have increased skill requirements, contributing to a significant widening of the wage gap between university-educated workers and those with a lower level of educational attainment in the United States; a similar but much smaller increase in the wage gap between these categories of workers is observed in Canada.

The third section considers the extent to which the characteristics of the labour market have impeded the rate of technological change. Several surveys of Canadian firms suggest that a lack of sufficiently trained or educated workers slowed the rate at which firms adopted microelectronics-based technologies during the 1980's.

The fourth and fifth sections outline probable trends in technology over the next fifteen years, as well as strategies for coping with related changes. Research suggests that massive unemployment resulting from technological progress is very unlikely, given the gradual rate at which micro-electronic technologies have been adopted. But technology will continue to affect the labour market in important ways. In particular, the rate of skills obsolescence will keep rising and the demand for skilled workers is likely to continue to grow.

A number of policies aimed at dealing with technological change are proposed. For youth, measures are needed to strengthen the school-to-work transition. High and uniform educational standards across Canada could do much to ensure that students are well prepared for the labour market. Other policies likely to help youth are increased expenditures on computer training in high school, an overhaul of vocational education, and a better interface between community colleges and local businesses. An important role for the federal government with regard to the last of these proposed policies would be to encourage the development of national standards for a series of certificate programs.

A number of initiatives are suggested to reduce the adverse impact of technological change on older workers, including experience-based unemployment insurance premiums and better support for the community college system.

Cooperation between the private sector, government and postsecondary institutions is likely to produce the most effective responses to changing skills needs and structural unemployment. The key to success is that local educational establishments obtain constant feedback from local businesses to ensure that courses and programs keep pace with the requirements of technology. Given evidence that Canadian industry adopted microelectronics at a slightly slower pace than other developed countries in the 1980's, and that a lack of skilled workers is often mentioned by Canadian firms as an obstacle to innovation, such tripartite policies could succeed not only in training young workers and re-training older workers in the skills most in demand, but they might also increase the overall rate of innovation and productivity growth in the Canadian economy.

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