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Cinema as Dream Machine

Disruptive technological advances have started to cause profound changes on the economics landscape. Replacing a person with a robot is one of the most frightening fear that people have lately.

As in the past, new technologies will change the way humans live and work. Some occupations will become obsolete, while new occupations will emerge. As a consequence, people will be displaced from some occupations, be forced to require new skills so that they can work in new occupations.

What will be the impact of the new technologies –robotization so to speak- on labor demand?

This is the most important question that requires an answer as new technologies keep shaping our future.

In searching for the effects of robotization on labor usage, most focus on existing jobs and occupations, disregarding the potential occupations in the future. It is true that new technologies make some existing jobs obsolete, and those work at such jobs will be out of work.

However, who would have thought 50 years ago that search engine optimization (SEO) will emerge and many will be needed to work as SEO expert. Think about the smartphone industry. In every corner of our neighborhoods there is an outlet either selling or repairing smartphones. In many industries and countries, the most in-demand current occupations or specialties did not exist 10 or even five years ago. Most of today’s children will end up working in completely new jobs that are unimagined.

Some occupations are more prone to being displaced by robotization, especially those that have routine and repetitive tasks like typists and telephone operators that are almost fully replaced.

It is true that the immediate effect of robotization is the reduction of employment because of substituting labor with robots. However, the new production technologies would lead to lower costs and higher level of economic activity, hence higher aggregate demand. That leads to higher employment. Furthermore, the use of robots would increase product variety; new products are created, which will boost economic activity further. Finally the induced effect of reskilling of human capital would lead to higher demand for labor.

Given that businesses adapt themselves and governments provide necessary regulatory framework to provide incentives for innovations and adaptation, robotization could drive the creation of many new occupations. Education and training for new skills will help to satisfy the new labor demand due to new occupations.

The impact of robotization on employment is expected to be positive. However, there is constant need to update the skill set of workers in order to keep up with evolving division of tasks between robots and humans. Hence, the main challenge for the future of employment is not the number of jobs available; it is the form of jobs and required skills set, and how to acquire those skills.