Final Report Summary - EUROEMP (Employment in Europe) The objective of the project was to study European labour markets and arrive at conclusions about best policy practice. The emphasis given to the problems facing Europe in the labour market, and consequently the interests of the research community and policy-makers, have changed since the project started. As the project progressed the penetration of new digital technologies into production, in particular robots and artificial intelligence replacing human labour, have emerged as the main issues facing European labour markets. The questions raised ranged from the doomsday scenario of “robots are taking our jobs” and “will there any work left for humans to do,” to the more measured “what are the challenges given the things that the new technologies can do”? Following this development we have shifted more emphasis to the dimension of technology and jobs, with special emphasis on digital technologies. Our approach to this problem centered on the fact that the new technologies are better substitutes for labour than older technologies were, so there will be more labour replacement, but the new technologies will improve productivity so measures are needed to ensure that the workers who lose their jobs are not disenfranchised and they make the transition to the new jobs that the economy creates.Our earlier work on deindustrialization established the influence of technological progress for structural change away from industry and towards a service economy. In more recent work we investigated the role of trade and in particular traded services. Although manufacturing products are still the main traded goods, services are becoming important traded goods on their own right, led by shipping and followed by others such as finance and tourism. In work that is still under way we show that comparative advantage in trade could offset the negative impact of faster technological growth on employment in the sector. This explains the relatively large size of the manufacturing sector in Germany, which has experienced fast productivity growth relative to the rest of Europe, and the large share of services, especially finance and other business services, in the United Kingdom. With robotics and AI, the expectation is that he deindustrialization in Europe will speed up, even if new outlets for European products are found abroad. The faster technological progress brought about by robots and AI is likely to shift labour out of the industries that can use these technologies to other industries that rely more heavily on human input.In empirical work with productive robots and their impact on employment in ten countries, nine European and the United States, we found that the impact of robots on employment is not as simple as is sometimes claimed to be. It depends on the institutional structure of the economy as reflected in its innovative environment. Making use of indices from the World Economic Forum, we show that countries with better innovative environment are better able to absorb productive robots in production without massive employment dislocations. But many workers will still have to make the transition to sectors that cannot as yet use robots or AI in place of labour, such as health and care, the creative industries and the hospitality industries. The most successful transitions are the ones that involve collaboration from workers, employers and government. Workers need to “own” the training and be open to learning new skills; employers need to provide the training and introduce the new technologies gradually and after consultations with workers; and government needs to support the reskilling and change the educational curriculum staring from high school, to adapt learning to the needs of the new technologies. We have found that labour market institutions and the state of the labour market impact on labour market outcomes in too complex a way to summarize individually but one finding that seems to be robust is that labour market policies and more generally successful worker transitions are impeded by labour unions acting non-cooperatively (or employers, although this is not easy to study in an empirical setting because of data limitations). We also found that wage rigidity is still present at critical times, like the financial crisis, and this is another impediment to the transitions that need to take place in present-day Europe.
