OECD Economic Surveys: United States 2018

OECD

• Publisher: OECD
• Year: 2018
• eBook ISBN: 9789264301412
• Topic: Social Sciences
• Subtopic: Sociology
• Index: Social Sciences

1. Addressing labour-market disruptions from trade and automation

The US labour market has been exposed to repeated disruptions in the past two decades, and a wave of change stemming from the rise of automation is looming large. Although unemployment is at an historical low, many displaced workers remain inactive and wages have been stagnant for occupation affected by these disruptions. The upcoming automation of tasks with robots, artificial intelligence and machine learning will bring many benefits, but it will also lead to employment losses and wage pressures for workers whose tasks will be automated. While the US labour market had traditionally the capacity to absorb these shocks, labour market fluidity has slowed in the past two decades, hindering the reallocation of labour and contributing to high unemployment and weak participation, with some locations particularly affected by these social troubles. Lessons from these past trends are helpful to formulate future policies helping improving opportunities for displaced workers.

OECD labour markets normally experience considerable dynamism. On average each year, one-fifth of jobs are created and/or destroyed and one third of workers are hired or separate from employers (DELSA/ELSA/WP5(2018)2). This is part of the normal reallocation of resources to their most productive uses in response to shocks. It also allows workers to improve their incomes by moving to new higher-paying jobs.

Despite this dynamism of creating new jobs, workers who have become unemployed have often struggled to find employment quickly and can experience a significant earnings loss. While the substantial globalisation shock during the 2000s has largely run its course, the prospect of greater automation and novel applications of artificial intelligence to a wider array of jobs - including in services - create a need to strengthen policies that can mitigate the negative consequences for affected workers.

The potential for further automation and artificial intelligence applications has given rise to dystopian outlooks with technological unemployment arising as workers lose their jobs. For example, some authors estimate that up to one half of jobs in the United States may be vulnerable to computing innovations (Frey and Osborne, 2017[1]). However, the outcomes are likely to be more nuanced due to various complementarities between workers and machines and the consequence of rising productivity making widespread redundancy unlikely (Nedelkoska and Quintini, 2018[2]). What seems more likely is that the nature and type of job will change.

Against this background, continuing technological innovation - with further automation and the impact of artificial intelligence on the horizon - is not necessarily grounds for pessimism about labour market opportunities. But there will be disruption requiring workers to move in reaction to technological change and acquire different skills. The experience of the U.S. economy during the global trade shock suggests that some workers experienced greater difficulties in making the transition and were left behind even though on aggregate the labour market was resilient and has created significant numbers of new jobs. This chapter discusses issues that may help mitigate similar difficulties in adapting to future shocks.

Labour market impacts of technological change and globalisation

Technological change brings benefits through the introduction of new and better products, increased variety and gains from higher productivity raising living standards. With the spread of information communication technologies in recent decades, labour markets have been profoundly affected. Particular types of jobs - often routine ones - are increasingly performed by machines and workers have needed to acquire new skills. For other workers however, the introduction of new technologies has complemented their existing skills and made them more productive.

Trade remains essential for underpinning productivity and economic well-being. Gains from trade accrue from the ability to allocate resources to the sectors and locations where they can be most efficient. In particular, global trade integration has facilitated the efficient production of intermediate goods thanks to the organisation of fragmented supply chains. More open economies tend to grow faster and participation in global value chains is associated with better knowledge diffusion and stronger productivity growth. In the United States, more than 40% of imports are intermediate goods. These inputs can be essential to global value chains and ensuring the competitiveness of exports (OECD, 2017[3]). The structure of the economy is affected by trade, notably the demand for different types of skills, which imply a reallocation of workers across sectors.

Discerning the relative impacts from technological change and trade on labour markets is hard due to their inter-relation. The deeper integration of labour and product markets that has marked globalisation has accompanied and facilitated the introduction of new technology. Empirical work tends to suggest that technological change has had bigger measurable impacts than international trade (Goos, Manning and Salomons, 2014[3]). The impact of technology shocks on the wage premium, labour shares, job polarisation and deindustrialisation have been found in a range of studies (e.g., Schwellnus et al, 2018). That is not to deny the impact of trade, particularly for a local labour market where the employment and earning impacts can be substantial and persistent.

Technological change and globalisation

Technological progress and globalisation are having impacts on OECD labour markets through de-industrialisation of employment and polarisation of jobs (OECD, 2017[5]). Technology complements "non-routine" cognitive tasks and substitutes for the routine cognitive tasks, while having little effect on manual labour (Autor, Katz and Kearney, 2006[6]). In part, the dynamic is driven by technologies being able to perform tasks that are easy to codify - the routine cognitive tasks.

The impacts of technological change, along with changes in demand, have contributed to a shift in employment from manufacturing towards services in OECD economies. Real manufacturing output has continued to increase, driven by significant productivity gains, but its share in value added and total employment has fallen (Figure 1.1). There is some variation across countries in the extent of the decline. Notably, Germany has managed to buck the relative fall in output experienced elsewhere, but even there the employment share has still fallen.

Figure...

Table of contents

• Title page
• Legal and rights
• Introduction
• Executive summary
• Key policy insights
• Annex. Progress in structural reform
• 1. Addressing labour-market disruptions from trade and automation
• About the OECD