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1
Dr. Max MustermannReferat Kommunikation & Marketing Verwaltung
Prof. em. Dr. Dr. h.c. Joachim MöllerChair of EconomicsFaculty of Economics and Business Administration
Unemployment through digitization?
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Some basic facts on the German labor market
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3Source: German Federal Employment Agency; Statistic Department 3
Unemployment rate (in percent of civil labor force. Germany 1950 to 2018)
11,0
2,1
0,7
4,7
3,8
9,3
7,2
12,7
10,3
13,0
8,7
9,1
7,6
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Wirtschafts-wunder
Short-lived Recession
1st Oil Price Crisis
2nd Oil Price Crisis
Re-unificationAfter reform
period
After war period
Great Recession
5,2
2018
The broken trend in unemployment – on the path back to full employment?
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Short-term expectations: employment keeps on rising, unemployment falling
4Source: IAB Kurzbericht 7-2019
Employed
Unemployed
2012 20192013 2014 2015 2016 2017 2018
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Large regional disparities in unemployment rates
5Quelle: Statistik der Bundesagentur für Arbeit; Berechnungen des IAB; Arbeitslosenquote bezogen auf alle zivilen Erwerbspersonen.
D: 5,0%Ost: 6,4%West: 4,6%
D: 5,4%Ost: 7,3%West: 5,0%
Females MännerMales
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German youth unemployment rate is the lowest among the big European countries
6Source: Eurostat Labour Force Survey; Presentation IAB, unemployment rate for persons of age 15-24
0
10
20
30
40
50
60
Italy Spain France Germany United Kingdom
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Wage inequality in Germany is risingsince the mid-nineties
West Ost
Verhältnis des 85. zum 15 . Perzentil für Vollzeitbeschäftigte; Datenquelle: IEB; eigene Berechnungen; die gestrichelte Linie bezeichnet eine Veränderung in der Erfassung der Teilzeitbeschäftigung, um die statistisch korrigiert wurde (siehe Möller 2016).
1.5
1.7
1.9
2.1
2.3
2.5
2.7
2.9
C85/C15 Männer C85/C15 Frauen
1.5
1.7
1.9
2.1
2.3
2.5
2.7
2.9
C85/C15 Männer C85/C15 Frauen
EastWest
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8// Seite
Union coverage is lower in the East anddecling in both parts of the country
Percentage of workers covered by xollective agreements 1996-2017 by region and sextor
Source: IAB Betriebspanel © IAB – S. Kohaut - IAB Forum 20188
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Some more stylized facts about the German labor market
Unemployment lowest for the high skilled, highest for the low skilled
Upskilling of the labor force, increasing regional concentration of high skilled
Moderate real wage increases in the last years
Introduction of minimum wage (January 2015: € 8,50)
Demography: Ageing and shrinking despite high net immigration
Regional disparities (East/ West; North/ South)
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Digitization: fascination and threat
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Profound changes through digitizationThreats or opportunities?
Disruption
3D-printing
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The digital revolution is progressing rapidly...Areas of development
Cyber-physical systems offer radically new possibilities of networking...
Mobile robots, cobots
Assistance systems, remote maintenance, 3D printing
Platforms, e-commerce
Artificial Intelligence, machine learning
Within companies "Internal digitization", smart factoriesBetween suppliers and customers "external digitization"
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Elimination of jobs on a broad front?Some empirical studies draw gloomy scenarios …
0 0.2 0.4 0.6 0.8 1
Frey, Osborne (USA) 2013
Pajarinen et al. (FIN) 2014
Bowles (D) 2014
IngDiBa (D) (2015)
Gefährdet Nicht-Gefährdetthreatened Non-threatened
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The threating scenario of technological developmentA hype in the media?
» The experts are split into two camps. Some claim that the tide is rapidly rising and 80 percent of the jobs are destroyed in 20 years. The others believe that this will happen only later.«
Der SpiegelDer Spiegel, 17.4.1979
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19642016
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Are the threats exaggerated?Critical assessment of pessimistic scenarios …
Experts often overestimate the technical possibilities (author 2014)
Technical potential is not equated with actual substitution of human labor: legal hurdles (e.g. for autonomous driving), cultural preferences, reservations (robot service?) Profitability Hurdles
Share of specific activities within the professions assumed to be constant not realistic
Professions do not disappear, they are adjusting!
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The work does not go out, but it is changingTechnological progress leads to other activities within the professions
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The robots leave their cages...Cobots are directly interacting with workers …
Precision Speed Endurance Force Predictability Low maintenance costs
Creativity Emotions, empathy Social intelligence Ability to assess and make
decisions Problem solving
competence Intuition, flexibility...
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20Source: Dauth et al., IAB-Discussion Paper 30/2017
The use of robots increasesGermany one of the leading countries...
Robo
ts p
er 1
000
wor
kers
D EU USJahr
1995 2000 2005 2010 2015
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Possible substitution of human work by digital technology
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What kind of tasks can be replaced?Main theses of Frey, Osborne (2013)
Technical developments (mobile robots, machine learning, KI), not only displace simple standardized (routine) activities but also more complex activities!
Less endangered, however:
Activities of hand-eye coordination
Creative-intelligent activities
Social-intelligent activities
Calculation of the substitutability of (current) activities in the professions
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Substitutability of professionsFrey/ Osborne (2013)
Perc
enta
ge o
f em
ploy
ees
USA: : 47% of workforce (Frey, Osborne)
Acutely at risk (total in hatched area)
Source: Own presentation with data from Frey, Osborne (2013).
0
5
10
15
20
25
30
35
10 20 30 40 50 60 70 80 90 100Potential of substitution
USA: F&O
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Substitutability on the basis of activities Different values between Frey/Osborne and ZEW
Perc
enta
ge o
f em
ploy
ees
USA: F&O: 47% ofemployees
Total in hatched area:
USA: ZEW: 10% of employees
Source: Own presentation with data from Arntz, Gregory and Zierahn (2017),Frey, Osborne (2013).
0
5
10
15
20
25
30
35
10 20 30 40 50 60 70 80 90 100Potential of substitution
USA: F&O USA: ZEW
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Substitutability on the basis of activities Update: Higher values in the upper range …
IAB_2013: 15% of employees
Total in hatched area:
IAB_2016: 25% of employees
Source: Own presentation with data from Dengler, Matthes (2015, 2018)
0
5
10
15
20
25
10 20 30 40 50 60 70 80 90 100Potential of substitution
D:IAB_2013 D:IAB_2016
Perc
enta
ge o
f em
ploy
ees
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Change in requirements, occupational fields and sectors
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Substitutability decreases with the requirement levelProportion of activities that can be replaced in principle today
Source: Dengler, Matthes (2018): IAB-Kurzbericht, 4/2018
Unskilled
Skilled
Specialists
Experts
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Employment growth in recent years, however, indicates polarizationHighest growth rates for bottom and top requirements
Source: Own calculations with IEB data.
2012 2016 Growth ratein percent
in millions
Unskilled 3.66 4.15 13.4
Skilled 15.25 16.13 5.8Specialists 3.41 3.70 8.5
Experts 3.32 4.66 40.4
Total 25.63 28.63 11.7
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State of digitization in German companies
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Use of digital technologies by sectorSurvey in April/May 2016, percentage of shares
18.9
34.4
2.1
15.10
29.6
Services Zentraler BestandtteilunseresGeschäftsmodellsNutzen modernedigitale Technologien
Planen die Einführung
Setzen uns damitauseinander
Haben uns noch nichtdamit beschäftigt
6.90
29.70
2.7014.30
46.50
Production
Quelle: IAB-ZEW-Betriebsbefragung „Arbeitswelt 4.0“, IAB Kurzbericht 22/2016
Central part of our business model
Use of digital technologies
Plans of introduction
Discussion on digitization
Ignorance
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Technological unemployment
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» Those countries are suffering relatively which are not in the vanguard of progress.«
Technological unemploymentThe famous definition of Keynes …
» We are being afflicted with a new disease of …–namely, technological unemployment. This means unemployment due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour.«
John Maynard Keynes: Economic Possibilities for our Grandchildren (1930), (my highlighting)
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Technical progress is Janus-headedEffects on employment ambivalent
What is the net effect on employment?
Technical progress/Process
innovations
Increase in labourproductivity, less
manpower needed
Lower prices and/or higher quality
More demand, higher market share, more manpower needed
1
2
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What effect of technical progress?Competition and price elasticity
PriceElasticity of demand
Competition Employ-menteffect
New Products/ Competitive markets
High High Positive
New Products/Markets with low competition
High Low (Positive)
Old Products Low High/ Low Negative
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Other arguments for employment gains Product Innovations, Reshoring
Technology creates new services and products (product innovations) positive employment effects
Reshoring
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Higher unemployment through digitisation?e.g. Korinek, Stiglitz (2017)
Assumption: digitization leads to more fluctuation between companies/sectors/regions
higher separation rate higher unemployment in equilibrium
Assumption : digitization leads to devaluation of specific human capital
Consequence in imperfect labor markets:higher unemployment in equilibrium
Conclusion: tending to increase unemployment possible, but a second order effect!
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Technological unemployment through digitisationA counter position
» The idea that people would always have a unique ability that is unattainable for non-conscious algorithms is pure wishful thinking.«
Yuval Noah Harari: Homo Deus, 2017,S.430f.
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A recent plan: robots producing robots …Only marketing or revolutionary production technique?
ABB to build the world’s most advanced robotics factory in Shanghai
Milestone investment will combine connected digital technologies, state-of-the-art collaborative robotics and cutting-edge artificial intelligence research to create the most sophisticated, automated and flexible Factory of the Future.
Source: https://new.abb.com/news/detail/9410/abb-to-build-the-worlds-most-advanced-robotics-factory-in-shanghai
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The productivity puzzle
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Technology and productivityIs there a puzzle?
»You can see the computer age everywhere but in the productivity statistics.«
Robert Solow 1987
» ... measured productivity has increased rather slowly in recent years, even as the world seems to be captured by AI (Artifical Intelligence) fever.«Anton Korinek ,Joseph E. Stiglitz (2017)
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Productivity growth per hourDecline and stabilization at low-level
-2
-1
0
1
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4
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Own presentation with data of the Bundesbank; Growth rate vs prior-year quarter; 3-year moving averages and polynomial trend.
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Artificial Intelligence as a new basic technologyApproaches to explaining the productivity puzzle
E. Brynjolfsson, D. Rock, C. Syverson (2017):Basically four possible explanations for the productivity puzzle:
Higher expectations
Measurement problems
Distribution effects (zero-sum games)
Implementation delays (J-Curve effect)
Favored: The J-curve effect: effects only after complementary innovations and investments; these are often incomprehensible (intangible); e.g. adjustments, organizational changes, qualification in advance)
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Digitization and distribution
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The distribution problemDigitization exacerbates inequality
Outstanding importance of cutting edge technology, extreme scale yields
Markets (Big four of the digital economy)
"The winner takes it all"-structures
Segmentation of companies (polarized structure: "Lovely and lousy jobs")
Selection of highly productive workers in good companies, less productive in bad companies (card, Heining, Kline, QJE 2013)
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New start for wealth formation?Redistribution of property rights instead of redistribution of income
» As companies substitute machines and computers for human activity, workers need to own part of the capital stock thatsubstitutes for them to benefit from these new “robot” technologies. … Without ownership stakes, workers will become serfs working on behalf of the robots´ overlords.
Richard Freeman (2015), meine Übersetzung
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Conclusions
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ConclusionsOpportunities and risks of digitization
Significant drop in labor demand rather unlikely but stronger structural change
Professions will generally not disappear, but the job content is changing; Increased training efforts needed!
Adaptation requirements between qualifications, professions, companies and regions
Technological unemployment tends to be a second-order problem; Interaction with demographic change barely investigated
Distribution consequences, however, likely a first-order problem!
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Prof. Dr. Dr. h.c. Joachim MöllerInstitut für Arbeitsmarkt- und Berufsforschungder Bundesagentur für Arbeit
[email protected]://www.iab.de
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Robot stock (developed countries, excl. Japan)High dynamics in US, Korea, Germany
Source: Carbonero, Ernst, Weber (2018), Robots worldwide: The impact of automation on employment and trade, Ilo Working Paper # 36-
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Robot stock (emerging countries, excl. China)High dynamics in several countries
Source: Carbonero, Ernst, Weber (2018), Robots worldwide: The impact of automation on employment and trade, Ilo Working Paper # 36-
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Robots: Japan vs ChinaExponential growth in China
Source: Carbonero, Ernst, Weber (2018), Robots worldwide: The impact of automation on employment and trade, Ilo Working Paper # 36-