SPRU - Science Policy Research Unit

Technical change, employment & inequality. A spatial analysis of households & plant data

A new £220k project investigating how technical change affects employment and income inequality, has received £163,000 funding from the ESRC. Led by Professor Maria Savona, the project team includes Dr Tommaso Ciarli and Professor Mariana Mazzucato, both members of the Economics of Innovation group at SPRU along with Victoria Boelman from The Young Foundation.

The project, “Technical change, employment & inequality. A spatial analysis of households & plant data” will investigate the innovation-inequality relation by looking at three mechanisms: the Schumpeterian creative destructive effect, the employment effect and the wage effect.

According to the London Futures Deloitte report (Frey and Osborne, 2014), 35 per cent of the current workforce in the UK is at risk of being made redundant over the next two decades as a result of the introduction of digital robots that will replace their tasks. For those that manage to remain employed, it is difficult to predict whether and how they are able to adapt their skills to the changing demand for occupational tasks.

One emerging trend is that, after the introduction of new digital capital, firms dismiss large shares of medium-skilled workers, while seeking either low skilled workers to perform highly routinised tasks, or very high skilled people who provide creative ideas and apply sophisticated knowledge to maximise the benefits of digital capital.

The polarisation of demand for tasks and the skills required to perform them is likely to be reflected in a similar polarisation of wages. This mechanism needs to be understood with more fine-grained data, new methods, and at a more disaggregated level than currently used. This project aims to reveal the micro-level mechanisms responsible for the effects of technical change and firms’ level strategies on employment and income distribution at a fine-grained geographical level.

The results of the study will support national and local governments, employers, civil society organisations, charities and donor organisations focused on poverty and inequality, trade unions and social innovators to formulate responses to the economic and social pressures induced by increasing income inequality and the impact of robotisation on employment.

Professor Savona said: “These decision makers will be able to formulate policies on inequality with a better knowledge of specific leverages and incentives that, while promoting innovations, reduce its impact on unemployment, underemployment and inequality, driving more inclusive and a fairer society.”

The project team will collaborate with the Young Foundation to disseminate the results of the project beyond academia.

‘Technical change, Employment & Inequality. A Spatial analysis of households & plant data’ is a 18 month project.


*Image courtesy of Chris Isherwood, Flickr (under Creative Commons licence)

**Image in box courtesy of Nick Harris, Flickr (under Creative Commons licence)