Opinion of the Economic and Social Committee on 'The impact of the introduction of new technologies on employment` (97/C 66/20)

At its meeting of 21 February 1995, the Economic and Social Committee, acting under Rule 23(3) of its Rules of Procedure, decided to draw up an opinion on 'The impact of the introduction of new technologies on employment`.

At its meeting of 21 December 1995, the Economic and Social Committee, acting under Rule 19(1) of its Rules of Procedure, decided to set up a sub-committee to prepare the Committee's work on the subject.

The sub-committee adopted its draft opinion on 11 October 1996. The rapporteur was Mr Cal and the co-rapporteurs were Mr Bernabei and Mr Ramaekers.

At its 340th plenary session of 27 and 28 November 1996 (meeting of 27 November 1996), the Economic and Social Committee adopted the following opinion by 80 votes to five, with five abstentions.

1. Introduction

1.1. The Economic and Social Committee held a special plenary session on employment in October 1995. In the course of this plenary session a number of Opinions were discussed () which had been prepared by the relevant sections on matters directly relating to debates in Community bodies and which had one aspect in common, namely, their impact on employment (see special brochure on this subject).

1.2. The present own-initiative opinion aims to enlarge on, update and study in greater depth the subjects under discussion and look specifically at the impact of the introduction of new technologies on employment. This subject has been dealt with extensively by various Community and international bodies; some pieces of work stand out, such as the recent OECD study on 'Technology, productivity and job creation`, the European Commission's Green Paper on the information society () and reports by the Consultative Group on Competitiveness (), the Forum on the information society (), and the High-level Group on the information society (). Other studies and has issued or is going to issue an opinion (the White Paper on education and training - towards the learning society, the Green Paper on innovation (), possibly a communication on tele-work, etc.), have analysed these issues, and this clearly demonstrates how topical and important they are.

1.3. The Committee does not intend to duplicate other current work and discussions but does wish to issue an Opinion on the matters which it considers to be most important and to make appropriate recommendations and proposals to the European Union's decision-making bodies; these could also serve to broaden the debates between the socio-occupational organizations represented on the Committee.

2. General comments

2.1. It is a fact, backed up by economic theory and the historical evidence up to the early 1970s, that long-term productivity growth has been a key factor in sustained economic growth, increases in income and standards of living, and job-creation. However, particularly from the mid-1970s onwards when the economic growth rate in Europe and the United States has been lower than post-war levels, questions have arisen about how the current situation has come about, all the more so since it is generally felt that technological developments have speeded up over this period, particularly over the last ten years (information and communication technologies, biotechnology, new materials and energy technologies).

2.2. Various explanations have been put forward for this 'productivity paradox`: faulty and problematic measurement of economic phenomena such as productivity, the relationship between macro-economic conditions and the innovation process, and the fact that present-day business and social models are not geared to making full use of new technologies' potential. In a macro-economic context where the growth in final demand has slowed down compared to past rates and the working population has continued to expand, the result has been to contribute to rising unemployment, particularly long-term unemployment, unemployment amongst unskilled workers and young people looking for their first job.

2.3. Views on future prospects differ. On the one hand, there are those who think that current changes are so radical and qualitatively different from those in the past that they require a complete rethink of the way that work and income are shared out. On the other hand, there are others who feel that the current imbalance between labour supply and demand is temporary and that current labour-shedding through the introduction of new technologies, especially information and communication technologies, will be followed by an upsurge in employment, notably in new sectors and activities. In both cases it is recognized that the effect on job creation will not be automatic and that macroeconomic and microeconomic policy initiatives more favourable to economic growth and job creation are now required. The European Commission's White Paper is a recent example of such an initiative.

2.4. In the past, technological changes spread slowly and were confined to certain sectors of the economy; this meant that jobs lost in one sector could be offset by job creation in others (typical examples of this are the shift of farm workers to industry or from the manufacturing sector to services). Nowadays however, new, low-cost technologies spread quickly to all sectors of economic life and almost all areas of social life.

2.5. The rate at which technologies have been introduced is slower in Europe than in other, more dynamic parts of the world, and has not been accompanied by the increase in investment which in the past helped offset the jobs lost. Although return on investments in the EU has again reached the historic high levels of the '60s, investment in the EU continues to focus on rationalization rather than expansion.

2.6. The growing incidence of speculative financial investment, encouraged by the free movement of capital and which may entail a lower degree of risk and may have, in some Member States, less disadvantageous tax conditions applied to it, could also have operated against productive investment.

2.7. The development of a 'culture of the new` is therefore indispensable from the standpoint of both supply and demand and will require the participation of the two sides of industry, the education and training sector, and the public authorities as a means of imparting a positive orientation to the growth-technology-employment dynamic. A virtuous circle must be created between purposeful planning, optimum use of human resources as the essential agents of development and a socio-economic development model which fosters a favourable attitude to technology and global competitive challenges, reduces uncertainty and provides incentives for the establishment of a new professional and entrepreneurial spirit. Europe's future and its place in the world depend in its capacity for innovative culture, since culture is the strategic resource which will determine the relative competitive advantages of Europe and the other main regions of the world.

2.8. At the microeconomic level, it is true that the dichotomy between skilled and non-skilled labour is gradually changing into a dichotomy between creative, participative labour on the one hand and routine, supervised labour on the other. The structure of employment is also changing significantly, with less full-time, permanent paid employment and more part-time, temporary contracts, self-employment and 'pseudo` self-employment.

2.9. The growing inequality between workers which has appeared over the last few decades has also been the consequence of a deterioration in the circumstances of less-skilled workers and a greater demand for skilled workers with new abilities. This new demand has partly been due to stiffer requirements in terms of qualifications and abilities, in the wake of technological innovation. However, it has also been due to greater competitive pressure flowing from the globalization of production, international trade and outward direct investment.

2.10. New technologies may substantially expand the role of the individual in the production process, but they may also make the worker more vulnerable to changes in the way labour is organized. In some cases, the skills required have even been downgraded.

2.11. Even in manufacturing companies in developed countries, the bulk of spending on staff increasingly tends to go towards functions which are not directly connected with production-type activities (research, design, marketing, supervision, finance, training, management and information technologies). Costs associated with directly production-related staff have fallen in relative terms and in some cases account for less than a quarter of the total personnel costs.

2.12. As a result, industrial companies embrace more and more services (either in-house or subcontracted to outside companies) and the sector providing services to companies is expanding. These organizational changes are taking place in parallel to developments in management theory (total quality management, 'just in time`, 'kaizen`, 'lean production`).

2.13. The dissemination of the results of research and development can stimulate benefits in economic terms. Where previously this was reflected in increases in productivity levels with the purchase of new productive equipment, it is now more evident in the service sector with the use of information and communication technologies. Whereas it should continue to be a priority to provide support and encouragement to R& D and to devise new products and processes, greater emphasis should be placed on spreading technology throughout the economic fabric and to every region of the European Union and on exploiting ideas and processes which are already known and developed.

2.14. The way that companies are organized and their size are also changing: we have moved from a phase where large, integrated companies held sway thanks to economies of scale, to a period where small and medium-sized companies have come to play a major role, both in production and innovation and in job creation. The prospects now are for 'extended` companies to be strengthened and organized in cooperation networks around information systems, where entities with different business styles can co-exist within the whole.

2.15. So as to use new technologies more efficiently and to be able to compete more effectively in a global economy, companies are focusing more on their core activities, with more decentralized management structures and wider distribution of responsibilities, and they are requiring new, greater and diversified abilities of their workforce.

2.16. The accumulation of knowledge within companies is assuming increasing importance for their competitiveness. Innovation is the process whereby new knowledge is transformed into new products and production processes. The extent to which technologies are used thus depends on the knowledge a company has accumulated and its capacity to organize its application.

2.17. Although it is an established fact that vocational training boosts a workforce's overall knowledge, some companies are moving away from investment in training because, the rush for short-term profits leads to cost-cutting, particularly of those costs where the effects are felt in the longer term. The OECD study even suggests that the fact that trained workers could be recruited by other companies may act as a deterrent to providing training.

2.18. The advocates of external flexibility (possibility of companies laying off and recruiting staff in line with changes in demand) and advocates of internal flexibility (where the aim is to safeguard acquired practical experience and accumulated knowledge) differ in their responses to the need for flexibility. Various recent examples suggest that it is easier for companies adopting greater internal, rather than external, flexibility to adjust to short-term economic fluctuations, as they appear to be better placed to react swiftly to them.

2.19. The employment impact of new technologies also depends on the way conflicts of interests in larger companies are solved between shareholders (and here investment funds are assuming increasing importance), managers (especially the senior technical staff), customers, suppliers (whose influence is growing as a result of the above-mentioned network operations) and workers.

2.20. Current perceptions about the changes now taking place and their impact on employment, work, access to knowledge, the law, culture, the authorities, education, inequalities, exclusion and ethics create not only hope but also fear, especially amongst the economically most vulnerable, insecure elements of the population.

2.21. In any transitional phase between two models of society and economic organization, there is necessarily a period of intense political debate which, if handled responsibly, is of enormous value in enabling technological and societal changes to be successfully anticipated and a new ethical approach to be consolidated, compatible with the social responsibility of companies and a social market economy.

2.22. The particular features of new technologies and their spread to all areas of economic and social life, further accelerate the changes taking place in society: changes in demography, markets, social structures and values. The information society or, as it is being called, the learning society (which is taking on a new technological base with information technologies) is now taking shape, and the social and cultural aspects cannot be separated from the technical and economic ones.

3. Recommendations and key proposals

3.1. The right conditions have to be created to broaden the democratic debate on what social model will provide the best conditions for making full use of new technologies in response to people's growing, diverse needs.

3.1.1. To ensure the smoothest transition from the current post-industrial society to the learning society, the political powers have to encourage as wide-ranging a debate as possible on the issues at stake so as to manage the processes of change, improve their acceptance, and anticipate and minimize their negative consequences.

3.1.2. The different aspects of the society now taking shape have been analysed extensively - increasing digitalization, virtual reality, the multimedia, fragmented social structure, network operations, incorporation of technology, constant product and process innovation, real time economy, direct contacts between producers and consumers, and globalization of markets. The way changes are occurring has a profound impact, particularly on changes to the labour market and on increasing inequalities in income, knowledge and activities.

3.1.3. Social cohesion, the preservation of cultural and institutional variety and moves to reconcile technological efficiency with quality of life are vital to secure sustainable, long-term development.

3.1.3.1. Social cohesion, as the OECD report acknowledges, as well as being valuable in itself, is also an important economic asset, and the way that the 'winners` can compensate the 'losers` in the process of change should be debated and resolved.

3.1.3.2. Diversity of resources and innovation systems improves efficiency. It is necessary to ensure that monoculturalism is not imposed and that interlinks between the different systems and cultures serve to reinforce global synergies.

3.1.3.3. Key aspects of this debate are the move from social acceptance of technological change to social consultation on its introduction and to the control by society of its implications, together with the potential use of new technologies to meet new requirements for a better living environment.

3.2. Education and training are increasingly recognized as the main vectors for identification, integration, social advancement and personal fulfilment, and as key factors in equal opportunities.

3.2.1. In the learning society where the flow and volume of information are increasing sharply, where there are more and more technological and economic changes and where the nature of work and the organization of production and services are changing, a climate is needed in which people are ready to assume their responsibilities and act with greater autonomy.

3.2.2. In addition to changes in supply, final users and consumers must be familiarized with new needs, if 'technological unemployment` is not to get worse. As the Consultative Group on Competitiveness acknowledged, the shift to an information society will be faster and easier if, in addition to technological stimuli, there is pressure from demand ().

3.2.3. It is necessary to adjust teaching methods and curricula so as to anticipate what skills will be needed and draw on the potential created by new technologies, in order to minimize the negative effects and maximize the positive ones.

3.2.4. Teaching teachers and training trainers is all the more important given that in some areas, young people are more familiar with the new technologies than those who are supposed to be instructing them. A bridge between school and the workplace can play an important catalyzing role here. Budgetary resources in keeping with the importance of this priority must be made available.

3.2.5. Vocational training must cease to be purely reactive and must succeed in anticipating new roles, new divisions of tasks and new responsibilities. It must be seen not as an expense which supplements investment in new equipment, but as an integral part of the process of organizational change and adjustment; this requires skills such as the ability to work in groups, solve problems and plan.

3.2.6. Life-long training and continuous acquisition of skills are essential to avoid a rift between those who know and those who do not, between those who can act effectively and those who suffer the consequences and are marginalized.

3.3. The role of the public sector must be reassessed and brought up to date to meet the need to create the infrastructures required for developing and applying new technologies, particularly information and communication technologies, and to ensure that they spread rapidly across the whole productive fabric. The cutbacks in public investment over the last few years may now make it difficult to regain the necessary levels. Implementation of the trans-European networks is vital to the provision of coherent, modern Europe-wide infrastructures.

3.3.1. National and Community public research and technological development policies must lend greater support to research in areas of public interest such as education, health, the environment and areas of joint public/private interest such as transport, communications, energy and the urban environment. They must fulfil the requirements of society, helping to boost competitiveness and safeguard jobs.

3.3.2. The industrial competitiveness objectives prioritized by the R& D programmes must seek to respond to the growing potential demand from society and allow constant improvements in new products, systems and services.

3.3.3. The public and private sectors as a whole can help here by linking up infrastructure initiatives and coordinating R& D programmes to provide a vital impetus to the innovation process. However, the public sector can also, through the demand created by public procurement, establish more propitious conditions for innovation.

3.3.4. The public sector is also influential in creating the regulatory framework within which companies operate, particularly the completion of the Single Market. It must help, as far as it can, to formulate the strategic options about which companies need sufficient advance warning.

3.3.4.1. National and Community R& TD policies must be based on forecasting and information instruments covering technological and employment scenarios with a view to the coordinated and consistent development of 'trend charts` using EU networks for early exchange of information on both employment conditions and technological assessments. These technological-employment scenarios must enable researchers to define R& TD priorities using a bottom-up approach and to coordinate their work in integrated European projects.

3.4. The way firms are organized, particularly in the matters of production, R& D and human resource management, has evolved relatively slowly. A number of studies have concluded that the slow pace of organizational innovation in both the private and public sectors explains why rapid technological progress has not yet significantly improved overall productivity.

3.4.1. The need to boost competitiveness and the changes in management theories must be turned to good advantage. The aim should be to streamline complex, bureaucratic management structures; to integrate planning and implementation processes; to speed up the 'design cycle`, make it more effective and gear it to facilitating the organization of production and services; to eliminate non-productive activities, improve quality, shorten delivery deadlines, cut costs; to make production and services more flexible and thus respond better to changes on the increasingly global market. This will make it possible to establish long-term relations with suppliers and customers, and help to improve the overall quality of company networks.

3.4.2. Current efforts to introduce new equipment and provide technical vocational training are improving companies' capacity for response, but are not having a corresponding impact on global productivity; this is especially the case when these efforts are not accompanied by far-reaching changes in organization and management.

3.4.3. A variety of factors may thwart the process of transforming the way work is organized. This process needs strong leadership which can impress on people a sense of urgency which will motivate them. Such leadership needs to be based on a candid, realistic analysis of the less palatable aspects; it should promote cooperation within a group that has a sufficiently solid base in terms of information, knowledge, reputation and human relations; it should present a vision of the company which is sufficiently motivating and logical, rather than a mishmash of incompatible plans. Such leadership should convince people that change is possible, and should mobilize them to work towards this objective to the extent that they will accept short-term sacrifices; it should use each and every one of the channels available for communication with personnel; it should enable obstacles to the transformation process to be overcome in a socially acceptable manner and should plan visible improvements; but it should not shout victory at every step and should be aware that the process will be a long one. Finally, leadership should ensure that the changes will percolate right through the firm's organizational culture, making them an integral part of the values and practices of that organization.

3.5. Changes in organization as well as aspects of new technologies and new competition conditions require new labour relations where workers are no longer limited to carrying out pre-established tasks, but have more scope for initiative and decision-making. Whether a labour force is capable of using new technologies fully and creatively, and of responding rapidly and flexibly to changes on the market, also depends on its level of motivation and involvement.

3.5.1. The use of new technologies to reinforce the Taylorist model, relegating workers to fragmented subordinate tasks following pre-established routines, is technically possible and has been the case in many firms. However, in the long term such an approach has meant that full use cannot be made of the new conditions: moreover, it runs counter to efforts to create more highly-skilled jobs.

3.5.2. Better results have been attained by another, more forward-looking model based on the joint use of technological and organizational innovation, where workers can combine technical knowledge with economic appraisal and, as well as widening their skills, can also carry out tasks involving different stages of the work process (problem diagnosis, machine maintenance and repair) and possess planning skills.

3.5.3. In theory there are various ways of defining the model for each company or service and of laying down rules for new labour organization; but the one which responds best to the European social model is through consultation and negotiation with workers' representatives. By means of a social dialogue at the different levels, resistance to change can be overcome, alternative prospects created and the link established between the training process and the process of changing organization and management.

3.6. The speeding-up of the technology-growth-employment dynamic threatens to aggravate social and regional exclusion. There is therefore a need for active policies to assist poorly-qualified workers and first-time job-seekers as the categories which are most economically vulnerable and likely to experience long-term unemployment.

3.6.1. The fight against exclusion should be further intensified in less-favoured regions whose geographical remoteness is aggravated by the lack of structures and infrastructures linked to the rest of the EU and by inequalities that are far greater in technological than in economic terms. Technological progress should therefore cover several levels - Community, national and regional - for the development, alongside advanced technologies, of broad-based technologies which can also stimulate low-tech industrial sectors but which depend on advanced production processes in order to tackle growing international competition. In the context of the priority attaching to EU economic and social cohesion, Community R& TD policy should be coordinated with Structural Fund measures so as to maximize their interoperative potential.

Brussels, 27 November 1996.

The President of the Economic and Social Committee

Tom JENKINS

() OJ No C 18, 22. 1. 1996, p. 37, 42, 54, 68, 74 and 83.

() COM(96) 389 final.

() Advisory group set up by the Commission in February 1995 as indicated at the Essen European summit. It comprises 13 experts representing private and public sector banking, major companies and social groups, chaired by Mr C.A. Ciampi, former Italian Prime Minister and Governor of the Bank of Italy, together with a permanent representative of the Commission.

() The Forum on the information society is an advisory group which met for the first time on 13 July 1995 in Brussels, under the chairmanship of Mr Martin Bangemann. The Forum has 125 members, appointed on a personal basis and including representatives of users of new services (companies, public services, consumer associations, SMEs, the professions), social interest groups (trade unions, employers' organizations, universities, family associations), content and service providers (publishers, broadcasters etc.), network operators, equipment manufacturers and institutions (EP, ESC, COR, data commissioner, local and regional authorities).

() A group of senior experts concerned with the social and societal aspects of the information society. The members of this advisory group are selected in agreement with the commissioners responsible for social policy, the information society, research and education, the internal market, and regional policy.

() OJ No C 212, 22. 7. 1996.

() Report of June 1995, point IV.2 - definition of strategy.