Technical change, unemployment and labor skills

Abstract

PurposeThis paper aims to contribute to the open, theoretical debate upon the effects of technical change on the production and labor process.Design/methodology/approachThe “optimistic” approach, which connects the compensation mechanisms and human capital theory, is compared to the dynamic approach of the labor process. Recent Labor Force Survey data are used to identify the trends and characteristics of labor markets in G‐7 countries.FindingsIn all G‐7 countries, unemployment is present and deepening in the last two decades, whereas any employment growth observed is mainly associated with part‐time, temporary, low‐paid and vulnerable jobs. Moreover, any rise in employment rates refers rather exclusively to unskilful labor.Practical implicationsNeither the increase in effective demand (high growth rates), nor the relaxation of labor market rigidities could lead to a sufficient employment growth that would evade unemployment. In addition, the increased investment in human capital failed to upscale workers' position in the production process.Originality/valueThe value of this paper lies in its acknowledgement that an effectual policy agenda for labor‐related issues should break apart from conventional beliefs that the increase in flexibility of labor market, the abolishment of asymmetries in supply and demand of labor skills and the enhancement of economy's effective demand could cope and provide a solution to current labor market hazards.