Technology, Innovations and Employment

The world economy is currently undergoing a fourth industrial revolution. Technological innovations have significantly accelerated changes in the structure of the economy, polity, and society. These innovations, often termed disruptive, are having an unprecedented impact on the organization of work and nature of employment.

Historically, technological progress has been marked by episodes of significant job losses and unemployment but also employment creation in new sectors and activities. The first industrial revolution, for instance, led to widespread displacement of workers in the UK. The resulting unrest culminated in the ‘Luddite riots’, where angry workers destroyed power looms that threatened their livelihoods in the wool and cotton industries. But significant jobs were created in several other activities.

During the first industrial revolution, many workers displaced by mechanization in Europe migrated to settler colonies in North and South America in search of work and a better life. However, the modern-day Global South lacks similar migration opportunities, despite youth aspirations to migrate due to unemployment. Rising anti-immigration sentiments, such as the recent evictions of migrants from the USA, reflect both rising domestic unemployment and political pressures to tighten migration policies.

Today, automation and digital technologies are again displacing workers, potentially on a massive scale. Scholars are divided on the long-term implications. Geoffrey Hinton, for example, argues that advancements in artificial general intelligence and robotics could eventually automate all tasks—both intellectual and physical—necessitating universal basic income schemes. In contrast, Daron Acemoglu contends that humans will continue to be essential for certain tasks, meaning AI will complement rather than replace the workforce entirely.

The World Bank’s 2019 World Development Report supports a more optimistic view, asserting that while automation may displace some jobs, it simultaneously generates new industries and employment opportunities.

Empirical research over the last four decades, covering technologies such as ICT, robotics, innovation, and total factor productivity (TFP), suggests that the labordisplacing effects of technology are generally outweighed by mechanisms that Technology, Innovations and Employment create or reinstate employment. However, blue-collar workers have borne the brunt of these shifts, highlighting the urgent need for effective upskilling and reskilling policies, along with targeted social support.

It is widely acknowledged that technological change causes short-term job losses. However, whether it results in long-term unemployment remains a contested issue. The debate features two camps: optimists, who believe that compensation mechanisms offset job losses, and pessimists, who argue that new technologies can, in some cases, lead to lasting employment declines. The phrase technological unemployment—coined by John Maynard Keynes in the 1930s—referred to this temporary imbalance during periods of adjustment.

The innovation studies literature, which examines product, process, market, and institutional innovations, illustrates the complexity of assessing innovation’s employment impact. No single framework can fully explain the direct and indirect consequences of technological change on labor demand. The core concern remains the relative pace of job destruction through automation versus job creation through new economic activities.

Evidence shows that product innovations (whether novel or imitative) tend to have a positive employment effect, while process innovations often reduce employment. Additionally, recent innovations are increasingly skill-biased— favoring more educated workers while displacing unskilled labor. This has led to wage polarization and growing income inequality within and across countries.

In open economies, trade and innovation together significantly shape employment and wage dynamics. National innovation systems play a vital mediating role in determining how technological innovations and their diffusion affect employment. The eventual employment outcomes depend on how labour market’s function, how wages are set, and how institutions support worker learning, adaptability, and welfare.

Paper writers should aim to develop consistent models that explain and predict innovation-employment dynamics at the firm, industry, and macroeconomic levels. In particular, the prospective papers may consider examining the following issue:

  • Firm-level innovation and employment: Exploring how innovation affects employment within evolving firms and market structures.
  • Innovation-trade-employment nexus: Understanding how innovation and trade jointly influence growth and labour markets.
  • Global value chains: Analyzing how technological changes reshape employment relations across borders.
  • Innovation and quality employment: Investigating how innovation affects job quality and wage structures.
  • Distributional impacts: Assessing how innovations impact different countries and regions over time.
  • Structural transformation: Examining how innovation drives shift across sectors and their implications for employment.
  • Artificial Intelligence: Sector-wise effects of AI adoption on employment and wage patterns.
  • Youth employment and upward mobility: Evaluating how innovation affects the educated workforce’s aspirations and opportunities.
  • Organizational innovations and gig economy: Addressing the impact of platform-based employment models on job security and social protection.
  • Reskilling ecosystems: Collaboration with government and industries to build agile, lifelong learning systems that align with emerging technologies.
  • Digital infrastructure and access: Bridging the digital divide for ensuring equitable participation in innovation-driven economies.
  • Inclusive innovation policies: Tailing strategies needed to ensure innovations benefit to marginalized communities and rural populations.
  • Public-private partnerships: Fostering job-creating innovations, particularly in green technologies and sustainable industries.
  • Labour market flexibility with protection: Balancing flexibility for firms with adequate security for workers (e.g., portable benefits, universal insurance) in the gig economy era.
  • Ethical AI adoption: Guidelines and standards governing the use of AI for ensure human dignity, fairness, and job dignity.
  • Urban-rural employment gaps: Leveraging innovations to decentralize economic opportunities and address urban concentration of jobs.