Digitalisation Creates Jobs but Needs Targeted Support

Digital transformation is creating more jobs than it is destroying, but still poses many challenges for establishments and workers alike. To ensure that the German economy remains competitive in this arena, the government needs to take action. This is the main finding of a project focusing on the German labour market entitled “Digitalisation and the Future of Work”, which was carried out by the Centre for European Economic Research (ZEW), Mannheim, and funded by the German Federal Ministry of Education and Research.

Using the results of a survey on the implementation of digital technologies in German establishments as well as a model-based estimation of the relevant macroeconomic mechanisms at play, the project aimed to investigate the ways in which overall employment, unemployment and wages are responding to digitalisation in Germany. Based on their findings, the project team of ZEW researchers, consisting of Dr. Melanie Arntz, Dr. Terry Gregory and Dr. Ulrich Zierahn, were able to demonstrate that the diffusion of digital technologies in German businesses has created more employment overall, but has led to other changes, most significantly in the employment structure.

According to their findings, around half of German establishments are already using technologies characteristic of “Industry 4.0”. Accordingly, many have already combined traditional industrial production techniques with modern information and communication technologies (ICT). Though these technologies currently only make up around five per cent of these establishments’ means of production and just eight per cent of their office and communications equipment, the trend over the recent years clearly indicates that digital technologies are playing an increasingly important role in everyday business practices.

Recent investments in these new technologies have led to a one per cent increase in employment levels between 2011 and 2016, which is equivalent to an increase of 0.2 per cent each year. “Though these technologies have a labour-saving effect, up until now they have created more new jobs than they have replaced. The overall employment effect is therefore weakly positive,” says Dr. Melanie Arntz, acting head of the ZEW Research Department “Labour Markets, Human Resources and Social Policy”, explaining the results of the project. Primarily jobs that involve routine tasks are starting to dwindle in significance as a result of digital processes, while analytical jobs such as software development or programming and interactive jobs such as medicine and dentistry are experiencing considerable growth.

“There is the looming threat of a growing technology gap among German businesses”

Compared to the 8.5 per cent growth in total employment between 2011 and 2014, the portion of this growth that can be attributed to new technologies is fairly small. However, simulations carried out as part of the project for the period 2016-2021 show that planned corporate investment in technology will raise total employment by 1.8 per cent. This is equivalent to an annual increase in employment of just under 0.4 per cent each year.

Due to these overall positive employment effects, the researchers believe that new technologies should be promoted in a more targeted manner, highlighting the looming threat of a growing technology gap among German businesses. “Establishments that invested heavily in modern digital technologies early on are still among the leaders in their industry, while those who came late to the party are noticeably falling behind. This divide needs to be tackled in a targeted way,” explains Melanie Arntz.

Their findings also showed that investment in digital technologies are a contributing factor in rising wage inequality. “High-wage professions and sectors are the ones that are profiting the most from new technologies in the form of higher employment and wage increases, while low-paid jobs and sectors, on average, are losing out,” says Melanie Arntz. According to the project report, this trend is set to continue over the next five years.

Preparing workers for the labour market of the future

In tackling this issue, the real challenge posed by digitalisation and “Industry 4.0”, according to the researchers, is preparing workers for the labour market of the future and in so doing improving every individual’s chance to benefit from digital transformation by moving into developing sectors and professions. This could help to counteract the shortages of skilled workers in professions requiring interpersonal or analytical skills, for example.  The possibility for workers to move between professions and sectors should therefore be encouraged. “Worker mobility helps to reduce skills shortages in growing sectors and to confine the worsening labour market prospects for workers in shrinking professions and sectors,” explains Melanie Arntz.

For more information please contact

Dr. Melanie Arntz, Phone +49(0)621/1235-159, E-mail melanie.arntz@zew.de