If technological change increases structural unemployment, why do most governments and
economists encourage such change?
In several sectors, there has been an extraordinary acceleration of technology advancement
in recent decades. The diminution of hard-muscular work, as well as office, financial, and
social activities, is included in the notion of technological change. In the first situation, the
introduction of robots in factories to move automobiles inside the plant has had an influence
on industrial production lines in the automotive business. As a result, there was no longer any
need to carry huge loads. For example, in the second situation, contemporary banks have
incorporated technologically automated operations to make their services accessible to
consumers through cloud chatbots and virtual assistants, eliminating the need for a physical
branch. As noted by Leontief (1979), "Certain sectors of the economy are more impacted than
others; some kinds of labour are replaced quicker than others,” Whether the technical
advancement is related to advancements in technology, industrial machinery, or financial
services, technology is transforming many sectors of contemporary economies and thereby
contributing to market trends. Many nations have relied on technical improvements to
reinvent their unique productivity by investing in research, depending on their degree of
technological maturity in innovation and technology.
Structural unemployment, which is characterized as a phenomena induced by industrial
restructuring and innovation of production processes, techniques, and methodologies, occurs
hand in hand with technological change. While technological advancements have a favorable
influence on the commodities and products produced, they may have a negative impact on
the employment market since automated operations lessen the demand for human labor.
The influence of technological progress on employment is connected to the fact that new
technology tend to deliver labor savings, which eventually renders certain conventional skills
necessary in manufacturing products or services outmoded and obsolete. Furthermore,
technological advancements may drastically lower the amount of worker time or skills
necessary to provide a certain commodity or service. As a result, the number of staff required
by businesses lowers. As a result, most occupations, tasks, and positions demand that each
employee swiftly adjust by learning new professional abilities. It will be critical for employees
to overcome this difficulty in order to keep their jobs in such a changing environment.
The influence of technology development on future outputs might bring up new market
opportunities. Technological advancements may boost production in a variety of industries.
These sectors might include both classic and innovative areas, such as communication and
logistics, as well as new energy sources. In such a setting, technology is critical since it is the
major change agent that may help to raise the quality of life by enabling sophisticated and
essentially borderless production models.
In order for the economy to recover from structural unemployment, governments must take
a well-balanced strategy that encourages private-sector investment while also identifying
measures to reduce the length of the working day. Companies that can cut the time of each
shift without affecting their profits or decreasing workers should be given tax breaks in
industries where items are produced mostly via automated processes, such as automotive or
manufacturing. This will enable customers to keep competitive purchasing power since prices
will not rise, and it will prevent structural unemployment from reducing demand for new
goods and services in the near run. For example, when air conditioners were first invented,
manufacturers indirectly helped to generate new employment for maintenance personnel
and A/C filter cleaners. Traditional cleaning businesses have been able to progressively alter
their services to comply with this new generation of product because a change in work
descriptions was offered.
Another step that the government should encourage is the establishment of day-to-day
collaboration with both business and labour. Ad hoc fiscal measures should be geared to
prevent nigh-shifts and decrease taxes for enterprises who give training to employees to upskill them on new trends and technology in sectors where employment is exclusively
restricted to duties such as operating automated manufacturing lines. Furthermore, the
government should enhance research funding since this would provide long-term benefits
and create new employment. By taking these steps, the government will be able to reduce
transfer payments while also lowering the unemployment rate owing to structural
unemployment. This will free up funds in the GDP to spend in other areas such as welfare and
social programmes. A recovery in transfer payments owing to structural unemployment might
also be utilised as a protective mechanism against seasonal unemployment, which is by far
the form of unemployment over which individuals have the least influence.