How will digitalization of the economy impact the labour market?

How will the next wave of technological progress impact the labour market? There may be lessons in the recent past. There is now a large body of evidence that the impact of technological progress since the 1980s has been “skill-, routine- and capital-biased.” These biases have contributed to “significant shifts in income shares between workers at different levels of the skill distribution, as well as between labour and owners of capital” (Berger and Frey 2016, 8). The evidence suggests six propositions about the impact of recent technological progress on the labour market. In this edition of Human Capital Law and Policy, BCBC's Vice President of Policy, David Williams, summarizes and then examines these propositions.

Highlights

• The range of human tasks that can performed by technology is expanding in the digital age.
• Technologies are productivity-enhancing though they do not appear to be large net job creators.
• Technology prices have fallen relative to wages over time, encouraging labour-substitution and dampening real wage growth for the lower part of the skill distribution.
• There is mounting evidence that technologies are skill-biased, contributing to wage inequality; routine-biased, contributing to job polarization; and capital-biased, contributing to a rising share of national income received by owners of capital relative to wage earners.
• The challenge facing policy-makers – in British Columbia, Canada and globally – is how to maximise the productivity gains of technological progress through digitalization, while taking steps to mitigate its intrinsically-skewed distribution of benefits.