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Impact of technology on employment

Conference Paper · August 1997

DOI: 10.1109/PICMET.1997.653243 · Source: IEEE Xplore

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 Impact of Technology on Employment
Mario W. Cardullo, Ph.D., P.E.
Northern Virginia Center
Virginia Polytechnic Institute and State University
7054 Haycock Road
Falls Church, Virginia 22043
Abstract-Employment in any industry is impacted by
the introduction of new technology whose objective is to
increase productivity. The initial result of such
technological introduction is the reduction of workers to
some extent. At some point, the productivity from the
new technology reaches a plateau. If the business
requirements are increasing, it is possible that the firm or
industry must start to hire new workers to meet the
increased industry demands. The introduction of
technological improvements starts the cycle anew. This
paper presents a model and empirical data, which
illustrates these employment cycles. The data presented
in this paper is for several Turkish industries. The
analytical model could apply to most industries, but
additional empirical data will be needed to very this
assertion.
I. INTRODUCTION
The introduction of any technology has various
consequences. These impacts occur in the environment, to
existing and future technological developments, financial and
social system in which the new technology is embedded. The
development and diffusion of new technologies has been
widely studied. Some studies have indicated that the
introduction of advanced technologies have resulted in higher
wages [1]. A number of economists who have been echoed
by politicians have raised concerns on the negative impact of
the introduction of technological innovations [2, 3].
Archibald [3] contends that in the long run natural market
forces will bring the economy toward full employment and
therefore jobs will be neither be created nor destroyed as the
result of technology transfer.
Ansal [4] examined in four enterprises the impact of new
technologies on women’s employment in two enterprises in
Turkey and determined in these cases there was a definite
impact on the number of women employed. A preliminary
model describing the potential impact of technology was
presented by Cardullo [5].
One of the results of the introduction of new technologies
is usually increased industrial productivity. This has been
Dr. Hacer Ansal
Faculty of Management
Istanbul Technics University
Faculty of Management
Macka- Istanbul 80680
one of the impetuses for scale reducing various enterprises.
The National Research Council study concluded [6]:
“Over the long term, new technology and
production processes tend to promote
productivity, competitiveness and economic
growth, all of which contribute to job growth
over time.”
II. TECHNOLOGY - EMPLOYMENT IMPACT SYSTEM
Fig. 1 shows a simplified model, which illustrates a
potential interaction of jobs and the interaction of new
technology or process. Technology will cause some job
displacement, but it will also cause some change and will
create additional jobs for trained workers to use the new
technology or processes. Historical evidence indicates that
such displacement effects are temporary if accompanied by a
capacity adjustment due to increased demand driven by
economic factors. Therefore, the overall impact of new
technology on employment is usually positive [6].
The development and introduction of information
technology is a recent example of the impact of new
technology and processes on employment. Some economists
view the information technology (IT) as more significant than
any previous technological development [7]. Many analyst
such as Ethan Kapstein, Council on Foreign Relations have
been quoted as believing that rapid technological change,
such as IT, coupled with increased international competition
is causing worker disaffection, inequality, unemployment and
endemic poverty [7]. However, new technologies and
processes are the main driving force behind economic growth
and increased living standards. Economic growth is coupled
with technological development to achieve greater
productivity from limited resources. Over the last 126 years,
there have been revolutionary advances in technologies and
their application to increased productivity. Fig. 2 shows the
growth in real income (gross domestic product - GDP),
productivity and employment in the seven major industrial
economies in the 1870 to 1995 period. According to The
Economist [7], employment and living standards have risen
because of technological change and not in spite of it.
 Increased demand

Higer prof itability or reduced

Decreased unit cost cost

Introduction of new Reduced requirement f or

Increased productiv ity Unemploy ed workers Reduced buy ing power
technology or processes workers with existing training

Increased demand f or Training in new technology

trained workers or processes Increased social costs

Increased salary f or trained Trained workers in new

workers Net impact on employ ment
technology or processes

Need f or new technology or

processes to increase Increased costs
productiv ity Impact on economy

Fig. 1 Simplified Model of Technology-Employment Interaction

Growth in GDP, Productivity & Employment (1870 =100)

10000

1000
GDP
100 Productivity
Employment
10

1
70

80

90

00

10

20

30

40

50

60

70

80

90
18

18

18

19

19

19

19

19

19

19

19

19

19

Fig. 2. Growth in Worker Living Standards, Productivity and Employment Based on data contained in [7])

III. SIMPLIFIED MODEL FOR EMPLOYMENT IMPACT

While technology changed drastically in the 1870 to 1995
period, employment, productivity and worker living
standards increased. However, what changed was the type of
employment. For example, programmers and computer
operators replaced typesetters. The replacement workers,
however, had a different skill set from the workers that they
replaced.
The simplified model used by Cardullo [5] to describe the
impact of technology on employment patterns was based on
the assumption that new technology introduction followed
the Pearl1 equation. The assumption was also made that the
productivity was directly related to the number of new

1
After U.S. demographer Raymond Pearl also known as the logistic curve.
technological units, which were introduced. Thus, the
resulting impact on employment is given by:
r  R  1  au e but 
W    technology in the short term will reduce employment as the
p  AU  1  ar e brt 
Where
W = number of workers required
U = upper limit of units which can be placed in use
R = upper limit of the requirement for new
technology
A = productivity factor
p = productivity at time t
r = requirement for units in an industry or
enterpriseusing the new technology at time t
au, bu = coefficients for units of new technology
placed within and enterprise or industry
ar, br = coefficients for worker requirements
The coefficient "a" affects the location of inflection point
in the basic curve, while changes in the coefficient "b" affects
only the shape of the curve. Fig. 3 shows a comparison with
the model with the data contained in Ansal’s paper on the
impact of technology on women’s employment in a Turkish
textile plant [4].
The following is empirical data on the impact of new
technology introduction resulting the adoption of CNC
machine tools and CAD/CAM on various Turkish
engineering industrial firms. This data is given in Table 1
[8]. The continuous model may predict patterns when
technology is introduced in large volumes, as was the case in
the textile industry a discrete model must be used when
similar technology is introduced in smaller discrete units.
The data indicates that on an industry basis, the model does
describe the cyclic nature of the impacts. While the data is
for Turkish industries, the model was developed
independently of the data. The model is primarily based on
the assumption that new technology increases productivity.
Most of the firms shown in Table 1 showed significant
reduction employees after the introduction of new CNC
technology. Without the economic data for the firms, i.e.
sales, as was given by Ansal [4], it was not possible to
differentiate the total reduced employment between
technology and market conditions. It is possible, that while
the productivity was increasing the market for the products
for these particular enterprises was either decreasing or
remaining constant.
IV. CONCLUSIONS
History has shown that technological developments will be
utilized even with significant worker resistance. The
economics of technology utilization also shows that concerns
about the negative impacts are unfounded. The overall
growth in living standards, productivity and employment are
the result in the introduction of new technological
developments. Technology itself increases output and
increases demand, either by increasing productivity or by the
use of new products, i.e., growth in the information
technology industry. However, the introduction of new
productivity is increased. If the market does not increase, big
enough, smaller number of workers will meet the needs with
increased labor productivity. On the other hand, in the long
term, it is assumed in the literature that such increased
productivity will also increase demand and employment.
Because, these increases in productivity is expected to reduce
costs, then either the price for the goods produce decreases
wages increase or profits increase. Hence, both the first two
factors reduce prices and increased wages are expected to
lead to increase in economic demand. Increased profits
would lead to increased economic demand by the availability
of increased investment capital. Therefore, long term
employment effect of new technologies depends very much
on rapid growth of markets or large enough economic
growths in countries.
The beneficial factors of new technology also result in
displaced workers with skill sets that are no longer
applicable. The impact of these displacements must be
mitigated if societal values are to be maintained. The
retraining of workers with redundant skill sets is an
imperative. Many enterprises usually do not undertake such
retraining since the costs are considered externalities.
However, the rapidity of the introduction of new technology
may cause more employees being displaced than in prior
eras. The majority of new technological additions will be
incremental. This implies that incremental training may
afford a means to retain many of the employees mitigating
economic disruptions.
REFERENCES
[1] Census, “Higher Wages Accompany Advanced Technology,”
Economics and Statistics Administration, U.S. Dept. of Commerce,
Washington, DC, Statistical Brief SB/93-14, 93/8 1993.
[2] G. P. Zachay, “Who is to blame for wage stagnation?,” in The Wall
Street Journal. New York, NY, 1996.
[3] R. B. Archibald, “Working Paper - Measuring the Economic Benefits of
Technology Transfer from a National Laboratory: A Primer,” .
Williamsburg, VA, 1996.
[4] H. Ansal, “Policy Implications of the Impact of New Technologies on
Women's Employment,” presented at Technology Management:
University/Industry/Government Collaboration, Istanbul, Turkey, 1996.
[5] M. W. Cardullo, “Technological Life Cycles: Causes and Effects,”
presented at International Engineering Management Conference,
Vancouver, BC, Canada, 1996.
[6] NRC, Information Technology in the Service of Society. Washington,
DC: National Academic Press, 1994.
[7] Economist, “The hitchhiker's guide to cybernomics,” in The Economist,
vol. September, 1996, pp. 3-46.
[8] H. Ansal, “The Impact of New technology on Economies of Scale and
Scope: Evidences from the Turkish Engineering Industry,” Alcorta, L.
 (ed.), Flexible Automation: Scale and Scope in Developing Countries,
Routledge, London, Forthcoming, 1997.

1600 12.00

Productivity (1,000 m per worker)

1400
10.00
1200 Productivity 1,000
No. of Workers
8.00 meters per workers
1000
No. of W orkers
800 6.00
600 Model Results
4.00
400
2.00
200
0 0.00

80 82 84 86 88 90 92 93
19 19 19 19 19 19 19 19

Fig. 3. Comparison of Model and Data for a Turkish Textile Plant (Based on data contained in [4])

TABLE 1
EMPLOYMENT DATA AND TECHNOLOGY INTRODUCTION IN VARIOUS TURKISH MACHINE ENTERPRISES
Firm Ownership Machinery after CNC % Work Done by New Technology Employment Before Employment After
Introduction CNC Introduced
A2 Local family 12 CNC lathes, 5 CNC 15-20 1990 152 278 (1993)
company machining centers, 1 CNC
induction hardening center, 252
various types of conventional
machine tools
B3 Local family & 13 CNC lathes, 7 machining 50 1982 508 466 (1993)
private individuals centers, 4 NC machine tools, 63
various types of conventional
machine tools
C4 Local individuals 6 CNC lathes, 30 various types 40 1985 162 154 (1993)
of conventional machines
D5 Member of a 18 different types of 25-30 1990 350 225 (1993)
domestic Turkish microelectronic based machine
conglomerate tools and equipment, 122
various types of conventional
machines
E6 Member of a 4 CNC lathes, 70 different types 10-35 1988 335 204 (1993)
domestic Turkish of conventional machines
conglomerate
F7 Member of a 14 CNC lathes, 2 CNC 15-30 1984 ------ 240 (1993)
domestic Turkish machining centers, 112 various
conglomerate types of conventional machines
G8 Local family 3 CNC lathes, 1 CNC machining 100 1987 70 55 (1993)
company center, 2 conventional lathes
H9 Member of foreign 19 CNC lathes, 3 machining 50-60 1989 935 602 (1994)
conglomerate centers, 180 various types of
conventional machines
I10 Member of a 8 CNC lathes, 4 CNC milling 75-85 1983 295 515 (1989)
domestic Turkish machines, 4 CNC machining
conglomerate centers, 1 CNC electrical

2
Firm A product range: real axles, front spindles, differential, housings, splined shafts, hubs, brake disks, shaft levers, pivots, pulleys and various other parts and
components produced from castings for automotive industry.
3
Firm B product range: Grey and modular iron castings and machining wide range of parts and components for automotive and engineering industries.
4
Firm C product range: Various types and shapes of valves
5
Firm D product range: Shock absorbers, washing-drying machine, dampers, sintered components and complete brake systems.
6
Firm E product range: Industrial and domestic types of oil boilers, submersible and standard circulation pumps and water heating systems for buses.
7
Firm F product range: Propeller shafts and universal joints
8
Firm G product range: Brake drums for buses, trucks and trailers
9
Firm H product range: Piston rings and cylinder liners
10
Firm I product range: Glass moulds, spare parts for machinery used in hollow ware glass production and parts for other sector s than glass industry
discharge machine, 1 CNC deep-
hole drilling machine, 158
various types of conventional
MTs
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