The Impact of Technology on Unemployment

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Advances in technology will result in a growth in unemployment. Technological advances allow society to produce more output from the existing mix of resources. These advances may take the form of less costly methods of producing existing output or may result in the production of new (or substantially improved) commodities (such as DVD players, HDTV, anti-lock braking systems, and similar innovations). Society clearly gains from the production of either more output or more highly valued output. Nevertheless, how do these technological advances affect employment? Virtually all types of technological change result in increases in the demand for labor in some labor markets and decreases in the demand for labor in other labor markets. The introduction of assembly line production methods and the production of interchangeable parts resulted in a substantial increase in labor productivity. This technological innovation also resulted in an increase in the demand for unskilled workers and a decrease in the demand for skilled artisans. The introduction of automated manufacturing processes, on the other hand, has resulted in a decrease in the demand for unskilled workers and an increase in the demand for quality control technicians and computer programmers. In general, technological change will alter the composition of the demand for labor, raising the demand for some types of labor and reducing the demand for other types of labor. Those who lose jobs because of technological change that reduces the demand for that category of labor are said to be structurally unemployed. Even though technological change may adversely affect the demand for labor in some labor markets, the overall effect of technological change on total employment may be positive. Technological change tends to increase the rate of economic growth. Higher rates of economic growth are generally associated with lower unemployment rates. While there is some doubt about the exact magnitude of this effect, there...
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