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“Digitalisation and automation aren’t as detrimental to the current organisation of production networks as previously thought,” said Isabelle Rabaud, a professor in international economics at Université d’Orléans, in France, and co-author of the study.

“Rather, technologies tend to strengthen existing backward and forward links that already exist between countries,” Rabaud said.

Economists have long understood that robotics and high-tech innovations can fuel productivity gains, but little focus has been paid to how technology affects where production is located globally. This knowledge gap includes whether the adoption of robots will lead to “reshoring,” the process of returning production to Europe from abroad.

To address this academic shortcoming, Rabaud together with colleagues from Université d’Orléans, Camelia Turcu and Marcel Voia and Robert Stehrer from the Vienna Institute for International Economic Studies, reviewed data from the OECD, the World Bank, the Centre d’Études Prospectives et d’Informations Internationales (CEPII), and the International Federation of Robotics. Using these data as inputs, the researchers created two models to test technologies’ effect on production networks.

In the first model, foreign value added in gross exports was analysed from 63 origin countries present in the exports of 27 EU destination countries. Internet use and broadband subscriptions were used to determine the role of digitalisation on the importance of backward global value chain (GVC) participation. The researchers speculated that higher degree of diffusion of ICTs would raise backward linkages in line with easier communication and lower costs of coordination.

Twenty-eight sectors in 36 non-EU countries of origin were examined. Sectors included transport, postal activities, accommodation and food services, insurance, and financial services.

To capture the effects on forward GVC participation, the researchers created a second model to simulate the effect of robot use in imported intermediate products (such as raw materials, ingredients, energy, and services) on the receiving industry in the destination country.

Using gravity equations, the researchers confirmed that the industrial use of robot, internet use and fixed broadband subscriptions in both origin and destination countries tend to increase fordward GVC participation. Results on backward GVC participation were more mixed.

“As economist Richard Baldwin famously suggested, technology enabled localized concentration of production and trade, in what he termed ‘factory Europe,’ ‘factory Americas,’ and ‘factory Asia,’” said study co-author Stehrer. “Our findings reinforce this and confirm technology’s leading role in the regional organisation of production.”

Rabaud,I., Stehrer, R., Turcu, C., Voia, M. (2023). The impact of technology and connectivity on trade patterns (Deliverable 3.4). Leuven: UNTANGLED project 1001004776 – H2020.

The paper is available here.

During the 22 November online debate, part of the final conference of Project UNTANGLED, moderator Karolien Lenaerts (HIVA-KU Leuven) posed the question of whether we are approaching a golden age for workers. In response, most panellists agreed that the growing labour shortages are exerting upward pressure on wages and working conditions, theoretically brightening the prospects for employees.

Frank Siebern-Thomas (Green, and Digital Transitions, Research Unit, DG Employment, Social Affairs and Inclusion, European Commission) highlighted that three-fourths of European SMEs currently face skills and labour shortages, while two-thirds of European companies cannot find IT specialists. While optimistic about worker prospects, he underscored the risks and structural challenges that EU governments and firms must address. These challenges include reskilling the European workforce to adapt to evolving job roles resulting from technological advances and the transition to a green economy.

Siebern-Thomas also noted that the European Commission is aware of these challenges and committed to addressing them through initiatives such as the European Year of Skills, focusing on upskilling, training, and innovation initiatives across member states.

“Is this a golden age for workers? Maybe, but much depends on policies and their effective implementation,” Siebern-Thomas said.

Melanie Arntz (ZEW), also optimistic about workers’ prospects, emphasised additional challenges that must be addressed for a golden age to materialise. She said particular attention should be directed to taxes and transfer systems and how they create incentives for working full-time. Arntz also raised concerns about AI and other technologies potentially devaluing certain skills and knowledge, leading to declining returns on formal education.

“It will be more difficult for people to guess what the return on formal education will be, which means they may underinvest in education because they might not be sure how much they’ll get out of it,” she said. “Therefore, we should provide as much transparency as we can on all these trends, so people can orient themselves around this new labour market.”

Arntz also highlighted another challenge: technology-driven mental stress among workers.

Marguerita Lane (Future of Work team, OECD) focused on the positive impact AI can have on the workforce. She highlighted the technology’s potential to boost productivity, alleviate sluggish growth, reduce the need for human labour in routine and manual work, and liberate workers from unsafe, repetitive, and monotonous tasks. Lane stressed that AI also has the potential to bridge inequality by enabling lower-skilled workers to level up. Similar to previous speakers, Lane emphasised that these positive outcomes can only materialise with the right policies and social safety nets in place.

“It is about policy choices; in this disruptive time, we need a smooth transition, and for this we need public services, governments, and companies to support workers displaced by new technologies,” Lane said.

Robert Stehrer (wiiw) took a less optimistic stance on the prospects for workers. Citing recent literature, he argued that the impact of new technologies such as AI on the labour market may not be very significant, and might not help overcome labour shortages. Stehrer also highlighted that the shrinking and ageing of the EU population places a burden on the healthcare and pension systems. According to Stehrer, it is plausible that we are entering a period of secular stagnation: a prolonged period of negligible economic growth.

“Even if there are higher wages, these will need to be taxed to meet the demands of the healthcare and pension system,” Stehrer concluded.

The discussion also covered areas such as working conditions, the challenges faced by platform workers, the potential and the difficulties of undeclared work, opportunities for migration to the EU, and gender dimensions within the workforce. Additionally, it explored how the evolving labour market is influencing the welfare state.

The UNTANGLED debate sheds light on the broad and diverse landscape of opportunities and challenges that makes up today’s labour market. The path to any golden age for workers must pass through that terrain, and technological advances in and of themselves aren’t enough to ensure a safe journey. Instead, it will require thoughtful implementation of policies that uphold the well-being and resilience of the workforce in the face of unprecedented changes.

Speaking on the panel “Poverty and Inequality Proofing of Policies for a Fair Twin Transition”, Doorley unveiled an UNTANGLED paper’s findings illustrating that tax and welfare policies can alleviate the impact of automation on income inequality.

The panel focused on the significance of Distributional Impact Assessment (DIA) in the context of policies and reforms implemented by Member States to support the digital (and green) transition. DIA plays a crucial role in measuring how these policies affect different segments of the population in terms of poverty and inequality. Other panellists included Sara De la Rica, the Director of ISEAK; Salvador Barrios, Head of the Fiscal Policy Analysis Unit of the Joint Research Centre, European Commission; and Cinzia Alcidi, Head of the Economic Policy and Jobs & Skills Unit at CEPS.

This year’s edition of the European Social Forum, hosted by the European Commission, centred around the impact of AI on the world of work. The conference aimed to discuss how EU policy can influence and address AI innovation in member countries, protecting workers’ rights throughout the Union.

Event Details:

Date: 22 November

Time: 4:00-5:30

Location: Online

The event will take place at KU Leuven on the Campus of Social Sciences on 23 November 2023 and feature a keynote address from Professor Melanie Arntz, Deputy Head of ZEW’s Labour Markets and Social Insurance Research Unit: “Different Perspectives on the Digital Transformation of the Labour Market.”

We will have nine sessions and over 30 papers:

1. Jobs and their quality
2. Global value chains
3. Skills and tasks
4. Inside firms and organisations
5. Technology, jobs and wages
6. Platform and flexible work
7. Technology adoption
8. Regional and structural change
9. Training, skills and working conditions

All the detailed information is in the Programme available HERE.

Register before November 12 HERE

Any queries can be emailed to Ilse Tobback at: ilse.tobback@kuleuven.be

Roberta Capello, Camilla Lenzi and Elisa Panzera from Politecnico di Milano presented their collaborative work within the framework of Project UNTANGLED, “The nexus between the digital service economy and intraregional wage inequalities”.

Additionally, Roberta Capello and Andrea Caragliu discussed their most recent UNTANGLED paper, “European integration and global cooperation: Long-run scenarios assessed with the MASST5”.

NARSC is an international organisation whose mission is promoting the exchange of knowledge, theory, and analysis of cities and regions on a global scale.

Conference Programme is available here.

New results from UNTANGLED paints a nuanced picture of robotisation and automation’s effects, helping to ease concerns about conditions for millions of workers as technological innovations enhance efficiency and replace tasks. While impacts will be heterogeneous, approximately 80% of 100 major European economic areas will experience net benefits in average workers’ welfare.

“Digital transformation represents more of an opportunity than a risk for most regions in Europe,” said Michal Burzynski, a labour market research scientist at the Luxembourg Institute of Socio-Economic Research (LISER), and a study co-author. “That said, workers in some parts of Europe will be negatively affected. Understanding these implications is crucial for formulating effective policies that address the challenges, and opportunities, arising from robotisation and automation.”

To evaluate the potential consequences of robotisation and automation on European labour markets, the researchers used a general equilibrium model, combined with projection scenarios, to benchmark how future technological progress may reshape labour in Europe.

With data on GDP, wages, employment, education and migration from Eurostat, OECD, and on robotisation and automation from IFR and EU-KLEMS, the researchers quantified average wage effects and changes in wage dispersion across occupations, sectors, geographical areas, and worker groups.

Overall, the researchers determined that while a strong majority of regions benefit from robotisation and automation, the effect is heterogeneous, both across and within countries.

“The Paris area, Austria, Switzerland, as well as Nordic and some Baltic regions belong to the main nominal GDP winners of robotisation and automation, followed by the rest of France, the south of Germany, Benelux, and Ireland,” they wrote. “A weaker positive or slightly negative impact is observed in the UK, and southern and eastern European regions.”

With a benchmark scenario calculated, the researchers then analysed the potential effects of robotisation and automation on workers with different origins, education levels, and skills using three scenarios of robotisation and automation: slow, medium, and fast. The slow adoption scenario will reduce average native welfare in half of the Europen regions. In the medium adoption scenario, average native welfare improved across Europe, except for in roughly 20 regions, particularly in France and Poland. In the fast adoption scenario, the negative welfare impacts concern fewer regions.

Across sectors, impacts on labour supply also varied. Manufacturing was projected as the most likely beneficiary of robotisation and automation in in Belgian and German regions. Public administration, education, and health services were projected to gain in most regions with higher positive impacts in Nordic and Alpine countries, while transport and storage was projected to experience the highest growth in eastern Europe and Austria. In contrast, construction and financial services tended to shrink in most regions.

The disparity in regional and sectoral benefits demands strong policy responses, the researchers noted.

“As robotisation and automation continue to progress, it’s increasingly probable that this trend will impact workers who have, thus far, been relatively unaffected,” said Joël Machado, a LISER research scientist and another study co-author. “Our projected scenarios can help policymakers better target interventions that support those who are adversely affected by the digital transformation.”

Burzynski, M., Machado, J., and Martin, L. (2023). Digital transformation, demographic changes, and labour markets. Projected implications for 100 European regions (Deliverable 6.2). Leuven: UNTANGLED project 1001004776 – H2020.

The paper is available here.

Some skills are being made obsolete by automation, while at the same time the demand for people who can perform non-routine tasks is increasing, according to a policy brief from the three-year project, which examines the effects of globalisation, demographics and technological change on labour markets in Europe and beyond.

Meanwhile, technology-driven changes are increasing demand for digital skills, and certain social skills, such as independence and enthusiasm, have also gained importance. Demand may shift again if artificial intelligence contributes to the automation of more non-routine skills. Employees’ self-perception of being under-skilled has also increased, the researchers find.

“Technological progress increases the value of new skills that younger workers tend to have an advantage in and diminishes the value of older skills that more senior workers possess,” said Piotr Lewandowski, head of the Institute for Structural Research, a member of the UNTANGLED research consortium. “As population ageing reduces the number of labour market entrants in Europe, investing in the skills of prime-aged and older workers becomes essential.”

To address the skill mismatch, the European Union named 2023 the European Year of Skills, with the aim that by 2030, 60% of adults will participate in training each year, increasing the employment rate to 78%.

Despite the need for upskilling and reskilling, the number of adults in training is low in Europe, ranging from slightly over 25% in Nordic countries to less than 10% in Eastern Europe (measured for the four weeks prior to the date they were surveyed).

UNTANGLED researchers argue that when providing opportunities for adults to upgrade their skills and qualifications, companies and policymakers should take into account that employees’ training needs vary and depend on many factors including age, gender, family, current skills, industry, and where they live. Unfortunately, the available training is scarce and doesn’t always match these needs.

“Data show that more than half of adults don’t see the point of training, suggesting that offerings should be improved, and more has to be done to raise awareness and outreach,” Lewandowski said. “Meanwhile there is also a group of employees who want to train but are stymied by time constraints and high costs.”

UNTANGLED researchers advocate looking into successful programmes and initiatives, including the introduction of on-the-job training grants, Individual Learning Accounts, and Training Leave.

Individual Learning Accounts, introduced in France, are like virtual savings accounts where balances accumulate over time that can be used to fund training, allowing workers to choose the skills that are most important to them. Over 2 million workers in France have used ILAs.

Training Leave programmes operating in Sweden let workers take time off from their jobs to improve their skills. This allows overcoming the problem of not having enough time, which stops almost 30% of workers from training. Giving financial help to workers taking leave and offering longer leaves could encourage more participation.

“Sweden’s long-term Training Leave programme addresses key obstacles employees face when thinking about training: it offers financial help and flexibility in choosing training,” said Wojciech Szymczak from the Institute for Structural Research, who co-authored the policy brief.

Finally, Lewandowski and Szymczak suggest expanding on-the-job training opportunities in small and medium-sized companies. Smaller companies often can’t afford proper training for their workers; policymakers could help by covering the cost. For example, Dutch authorities successfully introduced a programme that reimbursed training costs for such companies, leading to over 180,000 training projects in 2019.

Policymakers should take local conditions into account when implementing the recommendations, consulting with social partners such as trade unions and employers’ organisations, the authors say.

Lewandowski, P., & Szymczak, W. (2023). UNTANGLED Policy brief: Fostering lifelong learning as the market for skills evolves (Deliverable 7.3). Leuven: UNTANGLED project 1001004776 – H2020.

You can read the policy brief here.

Arntz, who is also Leibniz Professor of Labour Economics at Heidelberg University, will discuss “Different Perspectives on the Digital Transformation of the Labour Market.”

Registration for the conference, titled “Labour Market Effects and Social Impact of Technological Transformation, Globalisation, and Demographic Change”, is now open.

Register here.

Fore more information please visit our Events section.

The full programme will be available soon.