The relationship between technology and employment has long been a subject of debate. Technological change has contributed to the decline in manufacturing and to persistent unemployment in many advanced economies. This development is not inevitable, claims Marco Vivarelli from the Università Cattolica del Sacro Cuore in Milano. In his new article for the IZA World of Labor, he surveys the existing empirical evidence, showing that technological change can also induce job growth through innovation.
What are the roles of technology and innovation in explaining the long-term declining trend of manufacturing? Vivarelli distinguishes between job-destroying process innovation on the one hand and product innovation on the other, which can imply the emergence of new firms, new sectors, and thus new jobs. Policy makers should focus on maximizing the job-creation effect of product innovation, while minimizing the direct labor-saving impact of process innovation.