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The Third Industrial Revolution

Potential Impacts of Technology on Employment

19th January 2015 - 692 days ago

We are at the cusp of a third Industrial Revolution, with new technologies spawning a feverish excitement for a radical transformation in industrial production. Technological improvements in robotics and automation, as well as systematic changes in the economy that coincide with this revolution, will dramatically boost productivity and efficiency. However, because advances in technology tend to be capital-intensive, skills-biased and labour-saving, there is a risk that machines will sharply reduce jobs throughout the economy over time. Enlightened solutions to the challenges the third Industrial Revolution presents must first seek to ensure that technology benefits a broader base of the population through education and providing workers with the necessary skills. That most fragile balance – between the freedom of markets and the prosperity of workers – must be sought and found.

A Rather Shaky Foundation

Looking back at 2014, I see that a lot has changed in the world economy. For example, there is a new perception of the role of technology. Innovators and tech chief executive officers both seem positively giddy with optimism. New manufacturing technologies have spawned a feverish excitement for what some see as a coming revolution in industrial production. Yet, as we sit upon the cusp of a Third Industrial Revolution, it is not certain that the demand for labour will continue to grow as technology marches forward ‒ unless the proper policies to nurture job growth are put in place.

Nouriel Roubini
Nouriel Roubini

Nouriel Roubini

Professor of Economics, NYU's Stern School of Business; Chairman, Roubini Global Economics

For the last 30 years, emerging market economies in Asia have increasingly displaced the old industrial powers of Western Europe and North America as a base of production. Developed market economies have made up for those losses in manufacturing sector jobs through the service economy. In my view, however, there is no guarantee this positive scenario will continue.

Yet this is all just the tip of the iceberg. Whether it is retail, education, healthcare, government, or even transportation, a massive technological revolution will sharply reduce jobs over time.

The Coming Manufacturing Revolution

In the years ahead, technological improvements in robotics and automation will boost productivity and efficiency, which will translate into economic gains for manufacturers. For instance, the quick growth of smart software over the past few decades has been perhaps the most important force shaping the coming manufacturing revolution. This and 3D printing technologies will open the door to advances in manufacturing that have never before been possible. Highly skilled jobs will be created for those educated enough to participate in the new tech-savvy manufacturing world. However, for those workers not fortunate enough to participate in these gains, it may feel as though the whole revolution is happening elsewhere.

It Is a Small Step from Offshoring to Automation

Another trend that may result in a decrease in service-sector jobs is something we might call “the offshoring pathway to automation”... Read more.

Courtesy of WEF.

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