Digitalization: Recipe or Trigger for Structural Labour Market Problems?

Digitalization: Recipe or Trigger for Structural Labour Market Problems?

By Ulrich Walwei, Institute for Employment Research (IAB)

The future of work is depending on several factors. One of the important determinants is technological change. In the foreseeable future, digitalization is one of the main drivers in this respect. Central to this development is the production and use of digital logic circuits, and its derived technologies, including the computer, the digital cellular phone and the Internet. Advances in areas such as Machine Learning, Artificial Intelligence, Mobile Robotics and the increasing usability of Big Data will further facilitate a computerisation of the economy (Frey and Osborne 2013). Connectivity is reaching completely new dimensions. Electronic devices and microprocessors connect people with each other, machines with workers and machines with machines. Brynjolfsson and McAffee (2011) have identified an increased speed of technological innovation in the area of digital technology which is no longer confined to routine manufacturing tasks but may spread to numerous non-routine tasks.

Although developments in digital technologies have already gained momentum, the main impacts of this new era of technological change are to a large degree uncertain and still ahead of us. In order to deal with such a complex issue, the paper will use the German case as example and reference. The main purpose is not to generate additional evidence on jobs which may particularly be at risk through digitalization. Such investions have already been done for Germany (Bonin, et al., 2015; Dengler and Matthes 2015). The paper will also not carry out new long-term scenarios concerning the implications of the digital revolution on employment (Wolter et al. 2015).

The paper will, therefore, go beyond these studies. Its main aim is to give at least a tentative answer to the question how far digitalization may induce either a worsening or an improvement of structural labour market problems. One of the general questions in this context is how emerging digital technologies may influence the quality of job matching in the future. The answer may allow a preliminary assessment whether the spread of skill shortages and the persistence of unemployment may either be decelerated or intensified by digitalization. The third structural issue in this context deals with different forms of employment. The paper will ask how far previous shifts towards non-standard work and low-wage employment will probably be reversed or accelerated through the spread of digital technologies.

For each of these structural issues the relevant drivers will be identified. Based on this, possible implications of emerging digital technologies will be discussed. The results of this conceptual approach do not indicate that digitalization will make it much easier to tackle structural labour market problems. By contrast, potential risks may occur in a digital world which can make the handling of such problems even more difficult. Relevant in this context are expectations such as the considerable speed of change, increasing prerequisites to (re-)enter the labour market and lower opportunity costs of market coordination creating new types of employment (e.g. crowd employment).