EFFECTS OF TECHNOLOGY

ON EMPLOYMENT
IN ASIAN COUNTRIES AND THE UNITED STATES

In partial fulfillment
Of the course requirements for
BS Applied Economics and Accountancy

Submitted by:
Co, Shandy Michelle
Dillague, Rouland Jonathan
Galero, Sealtiel O.
Hernandez, Gabriel Iñigo M.
Huang, Charles Reginald K.
Joaquin, Ana Teresa B.

August 18, 2010

 Table of Contents

Introduction......................................................................................................................................1

Review of related literature..............................................................................................................3

Past studies.......................................................................................................................................3

Data..................................................................................................................................................5

Basics on employment and unemployment.....................................................................................5

Technology.......................................................................................................................................6

Adaptation to the evolution of technology.......................................................................................7

Effects of the advent of technology................................................................................................10

Conclusion.....................................................................................................................................11

References......................................................................................................................................12
 1

Introduction

According to macroeconomist Nicholas Gregory Mankiw in his Top Ten Principles of

Economics, “People face trade-offs.” All of us experience choosing something over another,
wherein we have to give up something to obtain something else. College students choose to
obtain education and give up the chance of immediately earning. A woman may choose to have a
baby and give up some of her time and money to care for her child. An employee can commute
and give up the comfort of driving to work to save money and preserve the environment. People
face millions of tradeoffs in a daily basis. As the ushering of the information age progresses, one
of the paramount tradeoffs the world faces is choosing that between the capitalizing of
technological advancements and the employing of manpower.
The effects of the taking advantage of the evolution of technology on employment is a matter
not unknown to us. Nevertheless, this issue in can be viewed in different perspectives. Some
consider Information Technology as a major factor of the increasing level of unemployment thus
believe that more jobs are being replaced by computers as technology evolves in leaps and
bounds. Interactions between humans are lessened in workplaces. Most of the jobs offered are
mainly targeted to those proficient with the computer consequently limiting the choices of those
who lack an outstanding background in computer handling. On the other hand, some regard
technology as a good means of job creation especially those in the high-paying industries.
Included in the stream of new jobs generated by computer technology are the system analysis,
web page design, database developing, and software programming. Some believe that the
integration of computer technology into the workplace would provide superior and more
streamlined services. Meanwhile, others claim that the unemployment rate would still continue to
rise and fall whether the technological advancements will affect it or not. Viewing this situation
in a humanistic perspective, people believe the cost of producing machines is not worth the jobs
they would replace.
Indeed there are many perspectives when it comes to the effects of technology on the labor
force. People have taken sides on the deliberation on regulation the utilization of technology
However, technological growth is almost inevitable.
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The discussion of this paper would focus on certain arguments regarding the effects of
technology on the unemployment rates. It is aimed to disseminate information and data on the
perceived changes in unemployment rates as a result of the harnessing of technological
developments.
 3

I. Review of Related Literature

A. Past studies
The analysis of a relationship between technology, environment, and employment is of
recent origin (Bhalla,1992; Pereira,1991). Therefore, the difficulty to find studies that attempt
to analyze quantitatively or qualitatively the possible tradeoffs between energy intensity,
labor intensity, and pollution intensity of alternative industrial technologies even in
industrialized countries is not surprising. One of the major difficulties in undertaking such
analysis is more of the lack of adequate data about polluting and non-polluting technologies
and industries rather than the vagueness of definitions of environmental considerations.
Back in the 1970s, policy implications of choice of technology were linked to the
production and employment modes, viz. family employment, extended family, wage
employment, and cooperatives. The technological sophistication increases with the mode of
production/employment. For example, technologies that can be economical for wage-based
firms are unlikely to be available to small household production units. With an increasing
emphasis on private sector development and growth of small enterprises, a comparative
analysis of technology choice by employment modes seems, on the surface, to represent a
fruitful enquiry.
The paper of Shahkooh, K.A., Azadnia, M. and Shahkooh S.A.(2008) investigates the
effect of Information Technology on the rate of unemployment. According to different
references, some people believe IT can increase the level of unemployment because a lot of
jobs will be carried out by machines. On the other hand, some other people oppose this idea
and believe IT will create new jobs resulting in a decrease in the level of unemployment. The
paper reviews the unemployment effects on society and discusses the effect of IT on
Unemployment. For this purpose, firstly, correlation between e-readiness scores and
unemployment rate of 61 countries is measured. Then, these countries are categorized into
different clusters according to their scores. Finally, it was concluded that IT reduces
unemployment in different countries.
Revolutions in information and telecommunications technologies and worldwide
processes of deregulation have been the key driving forces behind the emergence of the
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global knowledge economy. In 1995, the Council of the Academy of Technological Sciences
and Engineering in Melbourne, Australia decided to undertake a study to investigate ways of
providing a better knowledge basis for developing Australia's overall response to the global
knowledge economy. The result was the 'Working for the future' report by Greg Tegart, Ron
Johnston and Peter Sheehan (1997).
A new world economy is emerging as a result of the combined forces of information and
communications technology and international deregulation. The report of Tegart, Johnston &
Sheehan (1997) on the interaction of technology, productivity and employment in Australia
over the next decade seeks to provide a better knowledge basis for developing Australia's
overall response to the global knowledge economy. It begins by providing an overall
perspective, defining the broad implications of the emerging global knowledge economy for
Australia's economy and society with central emphasis on employment. The focus is on the
skill implications of economic change and the initiatives required to build a strong domestic
base, and in terms of policy initiatives, on the specification of the broad direction of policy
(Tegart, Johnston, & Sheehan, 1997).
As can be gleaned from the studies mentioned above, there are indeed positive and
negative effects technology has in Asian countries and the United States.
 5

B. Data
1. Basics on Employment and Unemployment
The definitions of certain terms must be clarified in order to avoid misconceptions
because some words have different meaning depending on the usage.
In economics, people are classified as employed if they (1) did any work at all as paid
employees during the reference week; (2) worked in their own business, profession, or on
their own farm; (3) or worked without pay at least 15 hours in a family business or farm.
People are also counted as employed if they were temporarily absent from their jobs
because of illness, bad weather, vacation, labor-management disputes, or personal reasons
(Employment Situation Technical Note, 2010). It also can be called employment when
people are hired and are laid off, but are still expected to be recalled.
To be part of the employment rate, one must be able to have all of the following
characteristics:
• Should be 15-64 years old
• Should be willing to work
• Should be able to work
• Should be looking for a job
The previous characteristics determine whether a person is part of the employment
rate or not. If one doesn’t have all characteristics even though one does have most of the
characteristics, then one is still not part of the employment rate.
On the other hand, people are classified as unemployed if they meet all of the
following criteria: (1) they had no employment during the reference week; (2) they were
available for work at that time; and they made specific efforts to find employment
sometime during the 4-week period ending with the reference week. Persons laid off from
a job and expecting recall need not be looking for work to be counted as unemployed.
The unemployment data derived from the household survey in no way depend upon the
eligibility for or receipt of unemployment insurance benefits (Employment Situation
Technical Note, 2010). Thus, unemployment is when people leave work and doesn’t (and
or not expected by their previous employers to) come back at once
 6

The employed and unemployed comprise the civilian labor force. Those not classified
as employed or unemployed are not in the labor force. In addition, the unemployment rate
is the number unemployed as a percent of the labor force and likewise to the employment
rate. The labor force participation rate is the labor force as a percent of the population,
and the employment-population ratio is the employed as a percent of the population
(Employment Situation Technical Note, 2010).
Unemployment comes in three forms. The first comes in the form of Structural
unemployment which is a form of unemployment resulting from the changes in the basic
components of an economy. This transformation closes the opportunity for certain form
of workers thus opening opportunities for other skilled workers to fill in the
unemployment gap. Frictional unemployment is the second form of unemployment, and
it refers to the form of unemployment that results as transition periods from one job to
another. Finally, cyclical unemployment is the form of unemployment resulting from
periods in business cycles. When economic growth is robust, cyclical unemployment is
low while the contrary takes place during an economic downturn Moreover, most of the
topics that will be discussed are focused more on structural employment, for the paper
mainly concerns the structural unemployment of workers as a result of the evolution of
technology.
2. Technology
The term technology thus often and usually characterizes inventions and gadgets
using recently-discovered scientific principles and processes. However, even ancient
inventions such as the wheel exemplify technology (WordIQ, 2010). In economics,
technology has different meaning. Instead of characterizing the invention of whatsoever
high-tech gadget, technology is defined as the current state of our knowledge of how to
combine resources to produce desired products (and our knowledge of what can be
produced). Thus, we can see technological change when our technical knowledge
increases (WordIQ, 2010).
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II. Adaptation to the evolution of technology

Based on the article entitled, “Changes in the Job Market,” the change in technology is
creating a change in job opportunities because some jobs that seem usual to us today were not
familiar to people before us; some may be computer illiterate. Although certain jobs are still the
same, many jobs have been modified or just totally replaced by certain employment trends that
reflected the improvement in computer technology to provide better service for people. Also,
many of the job opportunities available to past generations are no longer available to us today.
Certain employment trends where replaced by these machines since computers did a better, more
efficient, and faster application of the job, thus resulting to unemployment of some people. Some
of the examples of machine’s replacements from the world around us are the following: Traffic
lights replaced traffic cops; Computer terminals with network connections replaced librarians;
Computers replaced accountants. The new trends of jobs nowadays are definitely not comparable
to older ones. The changes in technology provided a better and more efficient way to provide
services that, consequently, caused this wide modification in employment.
 8

Employment Annual Growth Rate

7%

6%

5%

4%

3%

2%

1%

0%

Electrical Engineering Mechanical Engineering Civil Engineering

Chemical Engineering Industrial Engineering System Analyst
Computer Engineering Computer Science

However if we take a look at the positive side, there is a great variety of job opportunities
being created since the improvement in technology. The creations of new types of jobs that are
appearing in the job market are due to the change in computer technology. These jobs are also
faster and more efficient. Some of the sample preference of computer-related jobs gets better
ratings and salaries than other job trends – examples are: system analysts, web page designers,
and many others. People, who are computer literate, have a new, greater variety of jobs to get
involved in.
 9

Therefore, to adapt to computer technology, we should search for a career that could not be
replaced by these machines and search for careers that influence and affect this technology.
Technology growth is inevitable, nowadays there is a need for more technical people in fields
that relate to the computer technology. We are witnessing another revolution in history similar to
the industrial revolution. so, some people who do not adapt are being replaced by machines.
 10

III. Effects of the Advent of Technology

As indicated in the article, “Complex Picture of Information Technology and Employment
Emerges,” it states that, different computer applications are likely to have different effects on the
labor market. However, they may vary in the extent to which they substitute for human labor and
stimulate the demand for more-skilled workers. Furthermore, it is also important to consider that
the complexity of computers as a product does not necessarily imply anything about the level of
skill required to operate computers or work in a computerized environment. The majority of
people who use electrical devices or drive automobiles do not have a sophisticated understanding
of their underlying principles. Whether high-technology equipment is associated with high-
technology or highly skilled jobs is an empirical question.
Predictions that automation would lead to mass unemployment have persisted for many
years, as early as the Great Depression in the twentieth century and resurfacing in the mid-1950s
to early-1960s, when a combination of relatively high unemployment and new production
technologies led many to argue that a causal connection existed between the two. Although
periods of high unemployment are painful, they have reflected mostly oscillations in general
business activity rather than the effects of abrupt technological change. When macroeconomic
conditions have improved, unemployment has declined.
 11

Conclusion
After a thorough research on how technology affects the employment, our group has come up
with the conclusion that technology has a positive effect on employment. Technology generates
job opportunities for people especially for inhabitants of the Asian regions. Although the
evolution of technology has also contributed to the unemployment of individuals with skilled in
the traditional occupations, it has created a growing trend in employment as a result of the rapid
increase in workers knowledgeable in the technical aspect. Technical skills are what workers in
the revolutionized industry must possess. Continuous advancements in technology open up other
industries proving windows of opportunities for workers to pursue, but these individuals must
possess technical skills relevant to that certain industry. Technological growth indeed will be
inevitable in addition to its rapid evolution.
These technologies have created more jobs that are more skilled centered. These jobs require
a lot of mastery of skill in order to be able to operate properly. The labor force would have more
individuals that have a skill or trade rather than a certain proficiency in all trades. Individuals
have focused on one skill in order to become a part of the ever-competitive labor force. As a
result, more comprehensive training programs in the academe have arisen to complement to the
demands of technological growth. The specialization required of those pursuing various degrees
are taken to different levels as technology grows. Comparing the standard of specialization of the
present situation to that of half a century ago, one can obviously mark the differences between
these two time periods in terms of the specialization. The increase of technical knowledge is its
entirety is not bad. It is only a matter of being able to harness it not only for the advance of our
interest but also for the interest of the public in general.
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