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Business and innovation

Business and innovation

From technology to jobs

01 Sep 1998

Technology has been one of the chief drivers behind long-term economic growth and improved standards of living. But does it create or destroy jobs? Although new technology clearly destroys jobs in some industries, it creates them in others and has historically led to net job creation, according to a recent report* from the Organisation for Economic Co-operation and Development (OECD).

Yet technology is now associated with unemployment and social distress in many countries, as the OECD notes. “However, technology per se is not the culprit, ” the report continues. “Its economy-wide employment impact is likely to be positive provided that the mechanisms for translating technology into jobs are not impaired by deficiencies in training and innovation systems, and rigidities in product, labour and financial markets.” In other words, technology and innovation policies cannot work in isolation and have to be integrated into government policies on everything from economics to education.
  The report looks at the interactions between technology, productivity and job creation in an era of globalization and knowledge-based economies, and makes recommendations under five broad headings: the need for technology to play a key role in all governments policies; the use of technical change to increase productivity; the conditions for technical progress to create jobs; the need to make innovation and technology policies more efficient; and the political aspects of such reforms. Specific recommendations include increased incentives for university-industry collaboration, incentives for rival companies to work on pre-competitive research, improvements in the efficiency of various subsidies and tax breaks used to encourage R&D in industry, and increased flexibility in public research organizations (for example, making it easier for scientists to set up their own companies).
  All this activity, however, will require financial support, yet the amount of R&D funded by governments has stagnated since the early 1980s, and declined in many countries during the 1990s. There are signs that some governments are looking to reverse this trend – the US and Japan have discussed large increases, while the UK has actually confirmed a 24% increase over the next three years – but the outlook is not so bright in industry, where basic research is continuing to decline as companies focus their R&D on short-term product development. This will inevitably limit the ability of some firms to take advantage of new scientific knowledge. Although the OECD calls on governments to find new “mechanisms to stimulate…in-house basic research capabilities in industry”, it can offer no answers. “To date none of the OECD countries seems to have come up with incentives to prevent the drying up of in-house basic research in industry, ” it concludes.
  The degree to which we live in a world that depends on services rather than manufacturing is also evident in the report. Some two-thirds of the business activity, and 70% of the jobs, within the 29 member countries of the OECD are in services. Indeed, the report warns that there is “too much focus” on the high-tech segment of the economy, which is relatively small, at the expense of fostering innovation and technology diffusion throughout the economy. But there is good news for those in the high-tech sector, with the thriving service industry being one of the main purchasers of high-tech machinery and equipment.
*Technology, Productivity and Job Creation: Best Policy Practices (OECD, Paris, 1998)

Leading by example

Ernest Rutherford was one of the most remarkable scientists of the twentieth century. From a humble background in New Zealand he made a string of brilliant discoveries in physics, yet somehow managed to win the Nobel Prize for Chemistry. To anyone starting a physics degree this month, or anyone underwhelmed by their degree so far, Rutherford’s wholehearted and enthusiastic approach to the subject is a superb example to follow.

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