Question

b) Currently, there are very few signs of increased unemployment due to automation. Unem- ployment is low and labour force participation rates are high. However, if automation does eventually lead to a rise in unemployment, would you expect this to lead to an increase in cyclical, frictional or structural unemployment? Briefly, explain your reasoning.

Answer 1

Automation indicates the increased usage of technologies in works that were previously done by human beings or using technologies in otherwise impossible works. Currently, increased Automation has boosted the employment and labor force participation is higher. However, if in future Automation reduces employment, it would be characterized as Structural Unemployment. It is the type of unemployment that happens when the skills of workers do not match with skills required to operate the technologically improved machines.
Cyclical Unemployment occurs when the demand for goods and services is not sufficient to support full employment. Frictional unemployment occurs when people are in the process of changing their jobs and it's temporary unemployment of workers.
Structural unemployment is a type of involuntary unemployment as workers are ready to work at the prevailing wages but are not provided with the jobs due to fewer skills they acquire. Automation increases the need for required skills and education for a particular job. With an increase in technology, the structure of workers in the firm will change and there will be more proficient workers to operate the machines. Workers who are not skilled in these new changes in technologies are removed from the working force, it increases unemployment. Demand for manpower also reduces with the increased use of technologies. Less manpower is used to produce the same amount of goods within the same period with positive shifts in technology. With time, specialization and skills acquired require changes. For example, demand for manual typesetters disappeared with the digitization of printing plate production. This specifies that automation leads to an increase in Structural unemployment, which could only be tackled by increasing the skills to operate the new technologies.