‘Digital transformation to create more jobs than to destroy’

Posted on 12 Apr 2018 by Jonny Williamson

Digital transformation in Germany is creating more jobs than it is destroying, but still poses many challenges for establishments and workers alike, a new study has shown.

Manufacturers are severely lagging behind other industries when it comes to digital transformation - image courtesy of HSO
Digital transformation in Germany is creating more jobs than it is destroying – image courtesy of HSO

To ensure that the German economy remains competitive in this arena, the government needs to take action, the study ‘Digitalisation and the Future of Work’ by the Centre for European Economic Research (ZEW) has shown.

The project investigated the ways in which employment, unemployment and wages are responding to digitalisation in Germany.

And the results were based on a survey on the implementation of digital technologies in German establishments as well as a model-based estimation of the relevant macroeconomic mechanisms.

The findings have shown 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.

Around half of German establishments are already using technologies characteristic of ‘Industry 4.0’, and accordingly, many have already combined traditional industrial production techniques with modern information and communication technologies (ICT).

Though these technologies currently only make up around 5% of these establishments’ means of production and just 8% 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 1% increase in employment levels between 2011 and 2016, which is equivalent to an increase of 0.2% each year.

Dr Melanie Arntz, head of the ZEW research department, said: “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.”

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% 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%. This is equivalent to an annual increase in employment of just under 0.4% 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,” Arntz explained.

The study has also shown that investment in digital technologies are a contributing factor in rising wage inequality.

Arntz said: “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.”

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.

Arnzt concluded: “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.”

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