Today there is a popular concern or debate that technological advancement may replace much of the industrialized and other work force, creating widespread unemployment. For example, in 1983 the Upjohn Institute for Employment Research predicted the existence of 50,000 to 100,000 industrial robots in the United States by 1990, resulting in a net loss of some 100,000 jobs (Distress Inevitable as Robots Replace Low End of Workforce, July 1983), which means that the amount of advancing technology is directly related to the number of unemployment. Technological (ICT) advancement changes or introduces more efficient and effective ways in the production of more goods and services. It will be argued below that the to workers affected by technological advancement are those who have no skills on how to adapt to the technological change and in part lose their jobs in a fully competitive labour market. ICT is simply the use of software and machines, robots, computers, and the like in production. However, any better, faster, or more efficient way of producing is a technological advancement; better knowledge will be enough, even without a new tool or machine. Finally, the negative effects of slow and rapid technological change on employment and economy as a whole will be discussed. Our results show the effect of ICT investment on unemployment and also how telecommunications investment positively affects the creation of new products and processes, but increase the demand for skilled workers.

Introduction

The most constructive definition of “unemployment” is the shortage of supply to demand in the case of labour. It is the ability of someone who is willing and able to work at market wage rates but is denied the chance to do so. Increase in technology can be a cause of increase in unemployment. Technological advancement or increase in ICT may be described as any change in a production process leading to higher standards of living through increased output from the same amounts of resources or through the use of fewer resources to produce the same level of output. The type of unemployment applicable to this discussion is structural unemployment due to the replacement of workers by machines. The flow of the Information and Communication Technologies (ICT) has risen, bringing up again the old classical debate about the relationship between technology and employment. Structural unemployment occurs when the jobs available in a certain area do not match the talents of those who wish to be employed. As we will read later in the research, some believe that this kind of unemployment may exist throughout the economy because of rapid technological advancement. The nature of the different long-term “technological path” can be of importance in explaining national and regional differences in employment and unemployment trends. Obviously, this does not mean that short-term views focusing on prices (wages and interest rates) or on labour market regulation are not important, but they are probably insufficient in providing a complete interpretation of employment evolution. The fear is that ICT technologies have damaged – or even eliminated – the positive correlation between growth and employment which was undoubtedly one of the main characteristics of the Fordist “golden age” (Rifkin, 1995).

The economics of technology and employment

Economic growth theories predict that economic growth is driven on investment in Information and Communication Technology (ICT). However, empirical studies of this prediction have produced mixed results, depending on the research methodology employed. Yet the macroeconomic models which economists use to analyse business cycles contain virtually no mention of technology. The one exception to this model is “real business cycle theory,” which suggested that variations in unemployment could be understood in terms of workers choosing between work and leisure, depending on how technology affected productivity (and thus wages) at any given time. Empirical support for this theory, which was important in the 1980s, has proven as weak as its theoretical basis.

Is there a link between technical change and the demand for labour (Ricardian unemployment)? Changes in technology have in history affected employment because some tasks are done more precisely and simply than people can do them. For example, Henry Ford set up one of the first assembly lines, which increased employment in Detroit in the early 1900s. Many of the employees worked there their whole lives. But, as the auto business changed (for one thing, they last longer), then the employees had to learn new technological skills or changed jobs, depending on the situation. More computer enabled devices on cars, different materials (steel vs. fibreglass), and so on make a big difference. Early studies of the effects of computer investment found little or no correlation between information technology investment and productivity. More recent studies, however, indicate that computers and information technology may indeed be affecting the productivity of non management workers.