Issues and Background An increase in the pace of technological change can have two profound side effects in the labor market. It can increase the rate and the average duration of unemployment. Technology both eliminates jobs and creates jobs. Generally it destroys lower wage, lower productivity jobs, while it creates jobs that are more productive, high-skill and better paid.
Society clearly gains from the production of either more output or more highly valued output.
Virtually all types of technological change result in increases in the demand for labor in some labor markets and decreases in the demand for labor in other labor markets. The introduction of assembly line production methods and the production of interchangeable parts resulted in a substantial increase in labor productivity. This technological innovation also resulted in an increase in the demand for unskilled workers and a decrease in the demand for skilled artisans. The introduction of automated manufacturing processes, on the other hand, has resulted in a decrease in the demand for unskilled workers and an increase in the demand for quality control technicians and computer programmers. In general, technological change will alter the composition of the demand for labor, raising the demand for some types of labor and reducing the demand for other types of labor.