August 27, 2023

New Technology and Unemployment

Sanjay Roy

THE use of new technology has triggered an anxiety of job loss across the world. In advanced countries repetitive jobs at the middle levels are increasingly being replaced by use of intelligent machines empowered by artificial intelligence (AI) and Internet of Things (IOT). An array of new technologies seems to be inaugurating a technology revolution with the use of AI, IOT, big data, block chain, 5G, 3D printing, robotics, drones, gene editing, nanotechnology and solar photovoltaic. These technologies are in their various stages of applicability in various countries depending on their technology infrastructure and stage of adaptability.

Technologies are generally disruptive in nature as they often radically alter the existing production process and hence the prices. Technologies are meant to reduce human effort and therefore largely labour displacing in nature. But at the same time it requires production of new machines, components and also humans endowed with required skills and knowledge. The crucial question therefore is the net employment effect of technology. If the new generation of technology is general purpose in nature, that is having impacts upon different segments of production, then such impacts are much more disruptive and evolving in nature. It becomes particularly scary in a society where barring a handful of super rich everyone has to earn income by selling their labour power, skilled or unskilled hence fear of job loss looms large.

Reducing human effort becomes synonymous to unemployment and income loss for a large section of the population. It also demands reskilling of the existing workforce making large part of labour redundant in this process. The conflict between human beings and its creation or between the ‘dead’ and living labour once again seems to be playing out in the current context of new technological avalanche.


Capitalism has an inherent tendency of continuous and faster productivity growth compared to the growth of labour force. In other words, it has an in-built tendency towards unemployment which in different segments acts as the reserve army of labour and help containing the wage rate. Unemployment in a way acts as a ‘disciplining’ device in controlling the labour process. But the growth of productivity actualised by growth of innovation and technology is never a planned effort in capitalism. In fact, it is a spontaneous process, where every capitalist is inclined to introduce new machines and technology primarily to earn a premium over and above the average rate of profit in that particular industry as technology rent. Eventually as this new technology becomes the average technology of the industry, producer’s additional gain is gradually transferred to the consumer in terms of lower unit price, which once again triggers a new round of innovation.

But productivity growth caused by technology use may not always lead to higher unemployment. Some machines may replace existing workers but production of machines, its components and related infrastructure and logistics may create new avenues of employment also. So the net effect of the use of machines depends upon how productivity growth in a sector and its chain effects create demand for new products and services.

The standard notion is as productivity grows it has its impact on production at all levels resulting in a fall in prices, hence increases real incomes. With the rise in real income, people would demand more of the same goods or new differentiated products that would in turn create employment. But this argument rests on some crucial linkages: there has to be adequate diffusion of new technology and also that of the productivity gains such that it stimulates demand for new goods and triggers new investment.Therefore, growth of technology may lead to productivity gains but if the gains are confined as profits to the few, instead of being shared through higher wages and salaries, the demand for more goods or new goods may not increase to the extent of absorbing the labour force released by the use of new technology. If the gap between the growth of labour productivity and growth of real wage increases, which has been the reality in the world today, it essentially means a declining share of wages in value added. This actually reduces the potential of augmenting demand and hence employment.

The impact also depends on the segments where new technology is being used. Productivity growth and consequent fall in prices may not always lead to proportionate increase in demand. In segments of basic needs such as food, if the prices fall due to higher productivity the demand for food may not increase proportionately which might be the case for other consumables. Also if there is a large segment of population with a very low income, then even if prices of some goods fall, that may not necessarily enhance demand for those goods. More importantly for those goods and services people have arrived close to satiation, declining prices may not lead to higher demand.

Therefore, how technology growth would impact demand and hence employment is not predetermined and depends upon the landscape of use and composition of effects. Also it is beneficial to employ labour saving technology where labour is costlier or in high wage segments because that has larger impact on costs. In segments where wage costs are already low, technologies may not actually reduce costs although that might increase control of employers over the labour process. More importantly, producers also do not adopt new technologies on the basis of its scientific efficacy alone but only when the potential rent from new technology overwhelms the cost of replacement of old technology, then only producers introduce newer ones. Therefore, the pace of diffusion of new technology and also the diffusion of productivity gains is crucial in determining the net employment effects.


In the current phase of technological change, it is very difficult to assume a net positive employment effect, not because of the technology per se but because of the social context in which it is being implemented. The possibility of diffusion of productivity gains seems to be low as inequality has increased sharply during the neoliberal regime and there is hardly any chance of reversal of such trends if the current regime continues. This is also reflected by declining share of workers in GDP across the world. In the twentieth century, capitalism was forced to reconcile with rising inequality through social democratic welfare regimes and for about four decades the share of wages and profits remained stable manifesting at least a proportional distribution of productivity gains. This has been completely overturned by neoliberal policies. Secondly, the current phase of technological change is dependent on larger share of knowledge inputs that cannot be naturally or traditionally acquired. In the past industrial revolutions, large number of people involved in agriculture had been easily converted into factory workers with very little training.

But as technology frontier shifted very fast, the supply of labour force capable of handling new technology can be ensured only by imparting necessary education and skills which cannot be traditionally acquired. For instance, ploughing or sowing seeds also require certain skills but such skills have been imparted through generations without incurring any additional cost. Knowledge and skills to handling machines and procedures involving ICTs and AI cannot be acquired without costs. If education and training are increasingly commodified by privatisation that would actually lead to exclusion of a large portion of potential workforce. Finally, technologies are meant to reduce human effort in existing work and therefore should increase disposable time for human beings and hence expand the ‘realm of freedom’.

It is because of capital relations, new technology and the time released therefrom are propertied by the few who own the means of production. As a result, saving time is reflected by job loss. People do not have more free time because of the use of new technology, rather large number of existing workers are laid off from their means of survival. Also those who continue to work have to accept longer hours and higher intensity of work, as the capitalists want speedy realisation of the value of augmented constant capital invested in the new technology before it becomes obsolete. That’s why it is because of capital relations, technology which is an outcome of human wisdom turns against its own creator!