Do technological advances result in higher unemployment?
Issues and Background An increase in the pace of technological change can have two profound side effects in the labor market. It can increase the rate and the average duration of unemployment. Because firms may not consider it cost-effective to retrain some types of workers to keep up with change, notably the less-educated and older employees, these workers may be jobless for long periods of time, with some of them perhaps never working again. If technological change causes workers to become unemployed more often and for longer periods of time, not only will the level of unemployment increase, but the “natural rate of unemployment,” the hypothesized minimum sustainable rate of unemployment, will increase as well. ~William J. Baumol and Edward N. Wolff, “Side Effects of Progress,” Public Policy Brief, July 1998 Technology both eliminates jobs and creates jobs. Generally it destroys lower wage, lower productivity jobs, while it creates jobs that are more productive, high-skill and better
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