ICTs IMPACT ON JOBS EVIDENCE FROM OECD COUNTRIES

Andrea de PanizzaISTAT and OECD

STI - Economic Analysis and Statistics

Internet, Jobs & Skills: an Opportunity for GrowthOECD – Telecom Italia workshop, 18 Nov. 2014 -

Rome

This presentation

• Policy context and Conceptual background

• ICT use, productivity and employment

patterns

• Preliminary evidence on impacts: a macro

model

• Upcoming challenges and opportunities

• Which policies?

Policy context

• Long economic crisis & high unemployment

• Fast technological change driven by ICTs Are we destroying more jobs than we create? And

which jobs are created and destroyed?

Do we need policies? If so, what policies?

OECD work: CDEP and its technical WP MADE

• Measures and analyses (including the study outlined here)

• CDEP Ministerial in Spring 2016

What does the economic theory say?

ICTs as process innovations

• computer-controlled machines

• automated inventory flows and sales channels

Increase productivity/reduce costs,

and need for labour input

ICT as product innovations

• Smartphones, e-books, Apps, ...

• New and enhanced products in all fields of the economy (cars, medical devices, etc.)

Create new goods and services, as well as new markets

Price & income elasticity are key for adoption

Additional output requires aggregate demand and, ultimately, jobs.

Jobs and wages are part of the balancing mechanism for uptake and growth

Why ICTs differer from other techs

• GPT, embedded in other technologies, fast falling unit prices

• Leading in R&D, fostering innovation in other domains acceleration of innovations

• A major sector, cutting across industry and services, capital and consumption industries

• Q: slow-down in employment due to substitution with IT capital (?) – is ICT an enemy of jobs?

Productivity and labour use:different flavours of adaptation

Productivity (GDP/H) Labour input (H) Labour utilisation (H/POP) Labour intensity (H/L)

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100

140

180

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260

1970 1975 1980 1985 1990 1995 2000 2005 2010

Canada

60

100

140

180

220

260

1970 1975 1980 1985 1990 1995 2000 2005 2010

France

1970 1975 1980 1985 1990 1995 2000 2005 2010

Germany

60

100

140

180

220

260

1970 1975 1980 1985 1990 1995 2000 2005 2010

Italy

60

100

140

180

220

260

1970 1975 1980 1985 1990 1995 2000 2005 2010

United Kingdom

1970 1975 1980 1985 1990 1995 2000 2005 2010

United States

Expanding low productivity service jobs

Bifurcation

Reducing labour intensity and utilisation

A closer look at employment dynamics

90

95

100

105

110

115

120

2000 2002 2004 2006 2008 2010 2012 2014

CAN

ITA

USA

JPN

DEUGBR

FRA

ESP

120

130

140

Summing up (1): Race Against the Machine?

Employment stable in most countries despite strong productivity growth over last 60 years.

The drop in employment growth is specific to the US but ICT is spread in other countries.

Can technology explain the drop in employment?

Employment-population ratio in US now about the same as in the 1970s.

Labour supply might explain the US “exception”.

Some very preliminary findings(forthcoming paper by Vincenzo Spiezia)

• Macro analysis performed on 19 OECD economies (translong production function), including adjustment lags in labour demand.

• Looking at the partial correlation of IT capital with employment (i.e. at the net substitution effect)

• Ingredients: dynamics of (ICT) investment, user cost of capital, employment

ICT investment (1): trends

Slowdown since 2001: is it for real?

Growth in ICT capital services, 1995-2011

Source: V. Spiezia (2014, forthcoming), based on the OECD Productivity Database

ICT investment (2): the price effect

• The cost of IT assets also decreased tremendously, especially between crises

•

-18%

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

Before 2001 Between crises After 2007

Change in the user cost of ICT capital, 1990-2012, average yearly rates

Source: V. Spiezia, “ICTs and jobs: friends or enemies?”, forthcoming, based on the OECD Productivity Database

Empirical findings (1)Formal outcome

The negative effects on employment of decreasing ICT capital costs (substitution) are fully compensated by production increases (scale) in the long run time lags in adjustment are crucial

996

997

998

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1000

1001

1002

1003

1004

0 1 2 3 4 5 6 7 8 9 10

Emp

loym

en

t

Year

Change in employment following a permanent 5%-decrease in the user cost of ICT capital

Source: V. Spiezia, “ICTs and jobs: friends or enemies?”, forthcoming

Empirical findings (2)The impact on employment

Overall, uneven across countries and along time…Employment growth due to growth in ICT capital

Average yearly rates

Source: V. Spiezia, “ICTs and jobs: friends or enemies?”, forthcoming

Empirical findings (3)The impact on employment through the crisis

• After 2007, negative impact of ICT investment on labour demand, due to: Slowdown in the decrease of the use cost of ICT capital Negative effects of sustained ICT investment over the previous period

-6%

-4%

-2%

0%

2%

4%

Change in employment after the crisis due to ICT investment (%)

Source: V. Spiezia, “ICTs and jobs: friends or enemies?”, forthcoming

As a percentage of employment in 2007

The contribution of ICT investment to growth…

Source: OECD, Measuring the Digital Economy: a New Perspective (2014), based on the OECD Productivity Database

The role of ICTs in today’s economy

Source: OECD, Measuring the Digital Economy: a New Perspective (2014), based on OECD STAN Database, ISIC Rev.4, www.oecd.org/sti/stan and Eurostat, National Accounts Statistics

The role of ICTs in today’s economy

… and of Information industries to productivity

Productivity and R&D activity Information industries shares and levels

Source: OECD, Measuring the Digital Economy: a New Perspective (2014)

The role of ICTs in today’s economy

Apparent labour productivity levels:information industries and total economy (2012, OECD total ec.=100)

Share of Information industries in total Business expenditure in R&D (BERD), 2012, percentage values

Jobs creation in ICT industries, and…

Roughly the same share in total employment, but with very large variations along the business cycle

Employment in ICT industries in the OECD, 1995-2012As a percentage of total employment

Source: OECD, Measuring the Digital Economy: a New Perspective (2014), based on OECD STAN Database, ISIC Rev.4, www.oecd.org/sti/stan and Eurostat, National Accounts Statistics

The role of ICTs in today’s economy

ICT jobs in the economy (1)Overall trends

• On the growth, also through the crisis

Source: own computations on Labour Force Surveys information from Eurostat, US Bureau of the Census, Statistics Canada and Australian Bureau of Statistics

• ICT industries account for just above 40% of jobs

IT services, 28.8

Telecom services, 6.5

Media and content, 5.3

ICT manufacturing, 4.8

Public admin., Education and Health, 11.6

OTHER SERVICES, 7.3

Finance, 6.5Specialised business serv. (engineering, R&D, etc.),

6.3

Trade , 5.7

PRIMARY AND OTHER INDUSTRY, 5.0

Construction, 2.8

MAN - Transport eq., 2.3

Repair (including ICT), 2.2

MAN - Machinery and eq. (incl. install), 2.1

Electricity, 1.7

MAN - Electrical apparel, 1.2

OTHER, 17.1

Source: own computations on Eurostat and US Bureau of the Census.

Percentage distribution of ICT occupations across industries for 26 OECD countries, 2012

ICT jobs in the economy (2)Cross-industry distribution

ICT jobs in the economy (3)Quality of employment

Overall employment levels in ICT occupations determined by professional and managerial activities

ICT occupations by category, 2013As a percentage of total employment

The role of ICTs in today’s economy

ICT and JobsThe use of computers at work

Most jobs are impacted… but not everywhere!

The role of ICTs in today’s economy

Summing up (2)Empirical findings and other evidence

• No clear negative impact of ICT investment on jobs:in the long run, substitution and scale effects compensate

• ICT stays a driving force of innovation and growth:Their contribution to BERD and to productivity and GDP dynamics largely exceeds the sector’s size

• The impact on employment is mostly through transformation:Most ICT jobs outside the sector; jobs increasingly ICT-intensive; displacement occurs, but new jobs open-up elsewhere

• Successful adaptation deliversA correlation can be argued between ICT adoption and performance

The role for policies

• Helping successful adaptation: mobility of resources– Reducing institutional barriers and market imperfections– Labour market policy to include retraining opportunities

• Reaping the benefits of available assets: – Improving the delivery of public services– Promoting clever adoption

• Being forward-looking– Investing in smart infrastructures– Promoting skills creation and mobility