Innovation andthe LaborMarketDr.MScBertSadowskiTechnischeUniversiteitTUeEindhovenUniversity of TechnologyWhere innovation starts
Innovation and the Labor Market Dr. MSc Bert Sadowski
StructureCurrentSituationinLaborMarketsin EuropeHistoryof laborsubstitutionandtechnologicalchange("Ludditemovement")·Factor-biasedtechnologicalchange·Impact of technological change on wages andeducationTrendsof relativewagesintheNetherlands.Forces affecting wages in developed and developingcountriesTechnischeUniversiteitTUEindhoven-University ofTechnologyPAGE110/21/2013EcononomicsofInnovation2013
Structure • Current Situation in Labor Markets in Europe • History of labor substitution and technological change (“Luddite movement”) • Factor-biased technological change • Impact of technological change on wages and education • Trends of relative wages in the Netherlands • Forces affecting wages in developed and developing countries Econonomics of Innovation 2013 10/21/2013 PAGE 1
Youthunemploymentin EuropeYouth unemploymentrateYouthunemploymentratio20102012201020112012Q4*20112012EU-2721.121.422.823.29.09.19.720.920.823.023.78.78.79.6Euro area22.418.719.822.07.36.06.2Belgium6.78.521.825.028.128.47.4Bulgaria18.318.119.519.35.75.46.1CzechRepublic9.1Denmark14.014.214.114.29.49.69.98.17.94.18.65.14.5Germany32.922.320.919.312.69.18.7Estonia27.629.412.012.112.3Treland29.130.432.944.455.357.910.013.016.1Greece41.646.453.255.217.819.020.6Spain25.423.622.824.38.98.49.0France27.829.135.336.97.98.010.1Italy31.810.816.622.427.86.78.7Cyprus37.231.028.424.713.911.611.4Latvia35.332.226.424.27.710.49.0Lithuania15.816.418.718.53.54.25.0Luxembourg7.326.16.66.4Hungary26.628.128.813.413.014.214.56.7-72lfalea-7.477.68.79.59.86.05.36.6Netherlands38.38.78.88.7525.05.2Austria25.88.28.9Poland23.726.527.58.78.211.714.3Portugal27.7e30.137.738.422.123.722.722.26.97.47.0Romania15.720.623.25.95.97.1Slovenla14.7Slovakia33.933.534.035.110.410.010.421.420.119.310.610.19.8Finland19.012.824.822.823.724.112.112.4Sweden21.120.711.612.4United Kingdom19.621.012.4*Thequarterlyyouthunemploymentrateisseasonallyadjusted.e:estimateLUEindhoven-UniversityofTechnology10/21/2013PAGE2EcononomicsofInnovation2013
Youth unemployment in Europe Econonomics of Innovation 2013 10/21/2013 PAGE 2
Unemployment in Europe3027.926.2252016.516.916.9%1510.210.310.40.91101112.012212313013614.108.77.98.08.07.71.57.06.46.66.94.95.25.8R2EHA上8吉&335T3之38AV0*7E51-June2013$*Juv2013$**022015Technische UniversiteitTUEindhoven-UniversityofTechnology10/21/2013PAGE3EcononomicsofInnovation2013
Unemployment in Europe Econonomics of Innovation 2013 10/21/2013 PAGE 3
Labor market dynamics and technologyUnemployment ratesfortheyouthare mostlyhigherthanaveragerateof unemployment(2oo8:twiceashigh)>>solution:rebalancinglabormarket?JanvanOurs(TilburgUniversity)http:l/www.mejudice.nl/video/detail/jan-van-ours-over-de-arbeidsmarkt>>what is the function of technological change andinnovationinsolvingproblemsonthelabormarket?TechnischeUniversiteitTUEindhovenUniversityofTechnologyPAGE410/21/2013EcononomicsofInnovation2013
Labor market dynamics and technology • Unemployment rates for the youth are mostly higher than average rate of unemployment (2008: twice as high) >> solution: rebalancing labor market? • Jan van Ours (Tilburg University) • http://www.mejudice.nl/video/detail/jan-van-oursover-de-arbeidsmarkt >> what is the function of technological change and innovation in solving problems on the labor market? Econonomics of Innovation 2013 10/21/2013 PAGE 4
History oftechnological changeandemployment:TheLudditemovementTechnischeUniversiteitTUEindhoveneUniversityofTechnology10/21/2013PAGE5EcononomicsofInnovation2013
History of technological change and employment: The Luddite movement Econonomics of Innovation 2013 10/21/2013 PAGE 5
Alternative views ontechnologicalchangeandemploymentEffectsofinnovationand diffusionoftechnologiesaffectlabormarkets,levelofemployment,wages,andoccupationalstructureInnovationand technological change considered as havingpositiveeffectsonthe nationaleconomy,asitsustainsdemandforworkersInknowledgeeconomy,highskilledworkersareconsideredascompatibletohightechnologycapitalandknowledgestock (skills based technological change),but low skilledworkers will loose (loweremploymentand lowerwages)Technische UniversiteitTUEindhovenUniversityofTechnologyPAGE6EcononomicsofInnovation201310/21/2013
Alternative views on technological change and employment • Effects of innovation and diffusion of technologies affect labor markets, level of employment, wages, and occupational structure • Innovation and technological change considered as having positive effects on the national economy, as it sustains demand for workers • In knowledge economy, high skilled workers are considered as compatible to high technology capital and knowledge stock (skills based technological change), but low skilled workers will loose (lower employment and lower wages) Econonomics of Innovation 2013 10/21/2013 PAGE 6
WHEREASHistory: Luddite movement andREROERNERAMESIn diferentParts of the CountryLuddite FallacyTO GIVE NOTICE.BREAKING THEFRAMES,50GUINEASLuddite movement: in early 1gth century>REW.ARDSmashingnewequipmentintextileindustryComplain:Destructionof skilledjobthroughtheintroduction of newtechnologyLudditefallacy:Misconception,withincreasedproductivity employers would continue to produce aconstant outputwithfewerworkers,ratherthanexpandingtheiroutputfromagivenworkforceTechnische UniversiteitTUEindhovenUniversityofTechnologyPAGE710/21/2013EcononomicsofInnovation2013
History: Luddite movement and Luddite Fallacy • Luddite movement: in early 19th century > Smashing new equipment in textile industry • Complain: Destruction of skilled job through the introduction of new technology • Luddite fallacy: Misconception, with increased productivity employers would continue to produce a constant output with fewer workers, rather than expanding their output from a given workforce Econonomics of Innovation 2013 10/21/2013 PAGE 7
LudditeviewStill relevantforsomegroupsofworkersKeyquestion:whetherornotskillsarebeingmaderedundant(e.g.newmachinery offering cheapsubstitutefor skilled workor skills are enhanced andindemandastheyarecomplementarytonewmachinery)Example:NedCarBorn?TechnischeUniversiteitTUEindhoveneUniversity ofTechnologyPAGE810/21/2013EcononomicsofInnovation2013
Luddite view • Still relevant for some groups of workers • Key question: whether or not skills are being made redundant (e.g. new machinery offering cheap substitute for skilled work or skills are enhanced and in demand as they are complementary to new machinery) • Example: NedCar Born? Econonomics of Innovation 2013 10/21/2013 PAGE 8
Factor-biased technological changeTechnische UniversiteitTUEindhoveneUniversity of Technology10/21/2013PAGE9EcononomicsofInnovation2013
Factor-biased technological change Econonomics of Innovation 2013 10/21/2013 PAGE 9