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Robots, ICT and EU employment

Disruptive technologies based on ICT, robots, and artificial intelligence have transformed labour markets through their important effects on employmen

Publishing date
15 June 2018

We are currently experiencing an unprecedented digital transformation, driven by rapid technological progress. Disruptive technologies based on ICT (Information and Communications Technology), robots and – more recently – artificial intelligence have transformed labour markets, with important implications for employment. In our recent working paper, we studied the impact of robots on employment between 1995 and 2007 in six European countries: Finland, France, Germany, Italy, Spain, and Sweden. In order to do so, we adopted the local market approach proposed by Acemoglu and Restrepo (2017).

We found that one additional industrial robot replaces 3.4 workers, on average. Our estimate is significantly lower than that of Acemoglu and Restrepo for US labour markets. Indeed, for the same period, they estimated that one additional robot replaces 6.2 workers[1].

Figure 1 presents the correlation between changes to the employment rate and the change in industrial robots per 1,000 workers of each region. The negative correlation is consistent with our main result mentioned above.

Figure 1. Change in exposure to robots and in employment rate (change in percentage points)

Graph-1-1-e1529066756168

Source: Calculations based on Eurostat, EU Klems.

Note: Circles represent relative size (working age population) of each of the local labour markets considered.

In contrast, we found that the exposure of each region to ICT capital has a significant positive impact on employment rate. Figure 2 illustrates the positive correlation between the employment rate and ICT regional exposure from 1995 to 2007.

Figure 2. Change in ICT capital exposure and in employment rate (Change in percentage points)

ICT_regiononly_Total-economy

Source: Calculations based on Eurostat, EU Klems.

Note: Circles represent relative size (working age population) of each of the local labour markets considered.

In theory, we can divide new technologies into two different categories:

1. Enabling technologies, which complement and increase the productivity of certain types of skills.

  • For instance, laptops can increase the productivity of researchers or managers while software applications such as e-mail platforms can help increase the productivity of tasks which require coordination between agents in different locations.

2. Replacing technologies, which take over tasks previously performed by labour.

  • Industrial robots – namely, automatically controlled, reprogrammable, and multipurpose machines which can perform several manual tasks (welding, painting, assembling, handling materials, packing, etc.) – belong to this category.

Replacing technologies can have two opposite effects: On the one hand, they directly displace workers (displacement effect). On the other hand, they increase the demand for labour in industries which surface or develop as a result of technological progress (productivity effect).

A natural question that arises is: Which of these two effects dominates? Focusing on the industrial robot – one of the main automated technologies in our study – we conclude that the displacement effect takes precedence.

The fact that ICT capital has a positive impact reveals that different technologies affect employment through different mechanisms. For example, ICT incorporates enabling technologies where we only observe the productivity effect. However, ICT can also refer to replacing technologies. In this case, the productivity effect seems to dominate the displacement of workers overall. We leave it to future research to analyse and compare in a more detailed fashion the impact of different technologies on the workforce.

The difference in the estimated impact of robots on employment between the EU and the US is an interesting finding that requires further investigation. There are many potential explanations for this: from their different economic fundamentals, to the fact that the EU is the front-runner in the adoption of industrial robots and, therefore, robotisation is more mature than in the US. Exploring the impact of welfare systems and labour market protection policies on the relationship between robots and employment rates remains an interesting avenue to explore.   

As the number of industrial robots continues to rise, our results imply that some measures to facilitate workforce transition and accommodate the rise of automation might be needed to maintain satisfactory labour market outcomes. In any case, the extent to which displacement induced by automation progresses will greatly depend on economic growth and an increase in demand for all kinds of inputs (including labour) – thus preserving some jobs.

[1] It should be noted that the actual aggregate replacement effect is likely to be different since the numbers presented do not consider trade effects between regions.

About the authors

  • Georgios Petropoulos

    Georgios Petropoulos joined Bruegel as a visiting fellow in November 2015, and he has been a resident fellow since April 2016. Since March 2022, he has been a non-resident fellow. Since March 2019, he is a Marie Curie Skłodowska Research Fellow at MIT and Bruegel and post-doctoral fellow at the MIT Initiative on the Digital Economy. Georgios’ research focuses on the implications of digital technologies on innovation, competition policy and labour markets. He is currently studying how we should regulate digital platforms, what the relationship between big data and market competition is as well as how the adoption of robots and information technologies affect labour markets and firms’ market returns. He holds a bachelors degree in Physics, master’s degrees in mathematical economics and econometrics and a PhD degree in Economics. He has also studied Astrophysics at a Master's level.

  • David Pichler

    David was a research assistant at Bruegel focusing on macroeconomic related topics, fiscal and monetary policy. Before joining Bruegel, David worked as a trainee at the European Central Bank as well as at the European Investment Bank. He obtained a Master’s degree in Economics from Warwick University after completing his undergraduate programme in Economics at University of Graz, Austria.

    David has been working for the Austrian NGO Childrenplanet which supports projects in education, clean drinking water provision and health care in Cambodia. He is a native German speaker, fluent in English and has good knowledge in Spanish.

  • Francesco Chiacchio

    Francesco, an Italian citizen, works in Bruegel as a Research Assistant in the innovation and competition area, with a focus on trade and productivity, as well. Before joining Bruegel, Francesco was a trainee at the European Central Bank, working on projects related to productivity, Global Value Chains and technology diffusion, export intensity, and credit allocation, as well as on macroeconomic projections. He also interned at the European Commission, Directorate General for Competition, involved in projects related to the Directive on Antitrust Damages Action, and provided teaching assistance at the Tinbergen Institute.

    He holds a Master in Economics and Social Sciences from Bocconi University, where he specialized in quantitative methods and microeconomics.

    Francesco’s research interests include industrial and competition policy, firms and competitiveness, international economics and trade, and resource allocation. His personal interest also lies in possible applications of big data.

    He is fluent in Italian and English, and has basic knowledge of German and French.

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