ICTs IMPACT ON JOBS EVIDENCE FROM OECD COUNTRIES Andrea de Panizza ISTAT and OECD STI - Economic Analysis and Statistics Internet, Jobs & Skills: an Opportunity for Growth OECD – Telecom Italia workshop, 18 Nov 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 Expanding low productivity service jobs Bifurcation Reducing labour intensity and utilisation

A closer look at employment dynamics

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, 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 Change in the user cost of ICT capital, , average yearly rates Source: V. Spiezia, “ICTs and jobs: friends or enemies?”, forthcoming, based on the OECD Productivity Database

Empirical findings (1) Formal outcome T he 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 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 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, 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, As a percentage of total employment Source: OECD, Measuring the Digital Economy: a New Perspective (2014), based on OECD STAN Database, ISIC Rev.4, 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 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, 2013 As a percentage of total employment The role of ICTs in today’s economy

ICT and Jobs The 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 delivers A 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