Some employment, income, and occupational effects of microelectronic-based technical change: A multisectoral simulation for Canada

Abstract

This paper computes some potential employment and income effects of microelectronic-based technical change (MTC) in Canada. The probable upper and lower bounds of the predicted outcomes are determined by simulating alternative scenarios, and by computing the range of feasible post technical change transition paths for each scenario. The occupational shifts required to accommodate the technical change are decomposed into those originating from the supply side (labor productivity and materail input changes) versus those induced by final demand changes. These results are presented for an historical period, for the reference or counterfactual (no MTC) path to 1990, and for a 1990 post-technical-change solution. The aggregate results for a plausible scenario indicate that the microelectronic-based technical change modelled in this paper initiates a one-half percent average yearly increase in labor productivity and consequently results in a cumulative displacement of 5 to 6 percent of the (1990) required labor force from 1981 to 1990. Of course, when/if the appropriate structural adjustments take place, those workers will be re-employed and national income will improve correspondingly. An increase in Canada's rate of diffusion (especially vis-à-vis our trading partners) implies more initial displacement, but again the even higher productivity gains (plus the potential for export gains) should ultimately improve national welfare. This conclusion highlights the importance of facilitating the required structural adjustments.