Technology and the Employment Challenge

New technologies of various kinds, together with globalization, are powerfully affecting the range of employment options for individuals in advanced and developing countries alike. How, then, should policymakers, especially in developed economies, address the new and difficult labor-market challenges that they confront?

MILAN – New technologies of various kinds, together with globalization, are powerfully affecting the range of employment options for individuals in advanced and developing countries alike – and at various levels of education. Technological innovations are not only reducing the number of routine jobs, but also causing changes in global supply chains and networks that result in the relocation of routine jobs – and, increasingly, non-routine jobs at multiple skill levels – in the tradable sector of many economies.

How, then, should policymakers confront the new and difficult challenges for employment (and, in turn, for the distribution of income and wealth), especially in developed economies? From recent research, we have learned a number of interesting things about how the evolution of economic structure affects employment.

The tradable side of advanced economies has not generated any real net increases in employment for at least two decades, while the jobs that it has created are concentrated in the upper-income and upper-education ranges, with employment declining in the middle and lower range of income and education. Growth in high-end services employment is matched by contraction in high-employment components of manufacturing supply chains.

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