Technological change and employment

Abstract

Nowadays the increasing use of robots and algorithms able to perform tasks normally requiring human intelligence has raised again a widespread fear of a new "technological unemployment" wave. On the other hand, starting at the time of the first industrial revolution, the economic theory has pointed out the existence of economic forces which can compensate for the reduction in employment due to process innovation. Since that time, two views have started to compete in dealing with the employment impact of technological change: using David Ricardo's words, the "working class opinion" was characterised by the fear of being dismissed because of innovation, whilst the academic and political debate was mainly dominated by an optimistic ex-ante confidence in the market forces. This entry will critically deal with the complex and articulated relationship between innovation and employment, providing an economic theoretical framework and summarizing the empirical evidence provided by the current applied economic literature.