The Future of Work – Digitalisation Brings About Major Structural Changes

Technological change brings about permanent changes in the working world. The Centre for European Economic Research (ZEW), Mannheim, conducted comprehensive research on the challenges of digitalisation for labour markets in Germany, Europe and in 21 countries of the OECD (Organisation for Economic Co-operation and Development). A recent policy brief summarises key findings from related ZEW studies.

Digitalisation creates more jobs than it destroys, but it has a major restructuring impact on our labour markets. It strongly changes work contents, raises requirements for qualifications and competencies, and, hence, puts greater pressure on employees to adapt to these structural changes.

Changes in the working world

Using a job-based approach, ZEW researchers were able to show that the share of jobs that could technically be automated within the next two decades for 21 OECD countries is far lower than asserted by previous studies. On average, merely one in ten jobs is automatable. Moreover, this automation potential varies by country: while twelve per cent of jobs are automatable in Germany and Austria, the figure for Korea is six per cent. However, not all of these workers are likely to be actually replaced in the near future as the adaption of these technologies in businesses may take a long time.

Employment effects of technological change

ZEW studies on the very recent impact of technological change on labour demand in different regions of the 27 EU Member States have shown that automation processes lower production costs for businesses, which in turn causes product prices to fall. As a result, the demand for products rises, along with the demand for labour. The studies show that the overall effect of technological change on labour demand is positive after all. Machines have, in fact, replaced humans and caused a decrease in labour demand; however, this effect was overcompensated by product demand, which increased labour demand to the extent that it outpaced the substitution effects.

Changing qualification and competency requirements

While machines will take on tasks which are easier to automate, human labour will mainly be needed for tasks involving creativity or social interactions, which tend to require higher qualifications. ZEW researchers observed this trend towards an increasing demand for highly qualified workforce among both businesses and employees. In particular, the companies in the services sector have shown an increasing demand for high-skilled specialists. At the same time, approximately 80 per cent of employees stated that they see a great need to update their professional skills continuously. This was observed across all qualification groups; the share of individuals seeking to upgrade their competencies, however, increases with the level of qualification. Interestingly, the trend towards an increasing demand for higher-qualified labour is countered by a parallel trend towards lower skill requirements caused by technological progress. This can be observed, in particular, among low-qualified workers.

Low-qualified employees are under stronger pressure to adapt

The share of employees performing tasks with a high automation potential is significantly higher among low-qualified workers than among employees with a high or medium qualification level. This development is associated with increasing inequalities: highly qualified employees with a low degree of routine tasks benefit from a working world, in which professional requirements are constantly rising in the course of technological transformation. However, workers in low-skilled employment – characterised by a high degree of routine tasks – have reason to fear that their jobs might be replaced by machines in the future.

Need for further training in the course of digital transformation

As a result of the structural changes towards a digitalised working world, policy makers are facing the challenge of creating conditions which bring out the innovative and productive potential of technological change on the one hand, and ensure the employees' participation on the other hand. In this context, the further training of employees plays a key role. Besides introducing new training schemes in companies, it may also be necessary to create new government programmes targeted at specific groups which might otherwise fail to meet the changing requirements. Extra-occupational measures may, for example, have a stabilising effect on the employment situation.

For more information please contact:

Jun.-Prof. Melanie Arntz, Phone +49 (0)621/1235-159, E-Mail arntz@zew.de