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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.

 

In an interview with Francesca Guerzoni, Piotr Lewandowski of the Institute for Structural Research (IBS) presented the key findings from the UNTANGLED research paper “Automation and Income Inequality in Europe,” which he co-authored. The research reveals that although robots may have some adverse effects on the earnings and employment rates of more exposed worker groups in Europe, their influence on household income inequality is relatively limited, thanks to the balancing effect of European benefit systems.

 

Lewandowski highlighted the substantial variations among European countries. For instance, Belgium and Germany have experienced significant labor market disruptions due to automation, but their tax and welfare systems have responded robustly. This contrasts with Eastern European countries, where the response has been less pronounced.

 

For the full interview, please click here. To access the research paper, click here.

 

The research explores the extent to which wage disparities among employees in similar roles are influenced by a company’s willingness to invest in improving skills. The authors analysed spending both on general training and on IT-specific courses.

 

The paper finds that employees at European firms that invest in training earn 9% more, on average, than their peers at companies that do not prioritise workforce development. Among IT-intensive workers, this wage gap expands to 17%.

 

“Training is seen as a tool for improving employees’ opportunities and working conditions, and for increasing company productivity,” Cecilia Jona-Lasinio said. “The need for training increases with the pace of technological change. With the adoption of new technologies and acceleration of automation, formal education and experience are not sufficient, so new competencies are required.”

 

While previous studies showed 16% of European workers are exposed to skill-displacing technological change, the paper from Jona-Lasinio and Venturini shows that the adverse effects of digitalisation can be tackled at the company level through training policies.

 

The authors analysed data from 112,000 companies, employing between 10 and 999 workers, from twelve European countries, and found that 65% provided general training, with the highest proportions observed in France (84%) and the lowest in Bulgaria (26%). One-third of the companies also offered training in advanced digital skills, with the highest number in the UK, Norway, Germany and Denmark.

 

Data show that firms which invest in training tend to be bigger. The highest wages are paid by organisations where spending on upskilling is the highest, and where the largest share of the workforce is trained. In terms of the type of training, i.e. internal or external offered by a specialised institution, the combination of both yields the best results, as it gives employees a mixture of company-specific skills and more general ones.

 

“On an individual level our study shows that people who want to earn more should be ready for lifelong learning, and search for employers who offer training,” says Francesco Venturini. “Our study also suggests that the wage differences across firms might widen if laggard companies were unable to systematically organise training. We should keep this in mind when designing policies on innovation and support for companies.”

 

Jona-Lasinio, C. and Venturini, F. (2023), “On-the-job training, wages and digitalisation: evidence from European firms”, International Journal of Manpower, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJM-10-2022-0469

You can also access the paper here.

 

 

Ursula Holtgrewe (ZSI) discussed two case studies conducted within Project UNTANGLED that looked into how the introduction of innovative solutions impacts workers. An electronics manufacturer introduced an aspirational model of self-governance, whereas a testing, inspection and certification company implemented a top-down digitalisation initiative. In both cases, changes were ambiguous: worker participation did not include all groups of workers and came with some work intensification, and digitalisation led to some job losses and an enhanced work-life balance. In neither case, unions had a part in implementing the changes. Holtgrewe highlighted the need for further research on technology’s impact on the workplace that pays attention to the broader context of markets, management, and historical factors.

 

The webinar “Harnessing the Benefits of AI, Industry 5.0, and Other Digital Innovations – More Opportunities but Also More Challenges for Social Innovations?” was organised by the European School of Social Innovation (ESSI) and chaired by Antonius Schröder (TU Dortmund University). It took place on 19 October, with around 20 researchers and representatives of social partners taking part.

 

Ursula Holtgrewe presentation is available here.

 

The rapid expansion of automation has raised concerns for workers’ welfare, as robots are often implemented to improve efficiency and hence may replace humans. In the United States, the displacement of jobs due to automation has substantially reduced wages and employment, especially for those at the lower end of the wage scale.

 

But in a study of 14 European countries between 2006 and 2018, a period of intensive robot adoption in the European Union, researchers found that tax and benefit policies largely absorbed labour market shocks caused by automation.

 

“While the installation of industrial robots slightly decreased wages and reduced employment among the most exposed workers, the effect on household disposable income inequality was relatively small,” said Karina Doorley, a researcher at the Economic and Social Research Institute in Dublin, and a co-author of the paper. “Welfare and social benefits were a principal reason for this.”

 

The study shows that while inequality has widened in many countries in the last 15-20 years, it was not driven by robot adoption, but by other factors and policy choices that limited income redistribution.

 

Doorley and co-authors used data from several EU sources, including the EU Structure of Earnings Survey, the EU Labour Force Survey, and the EU Statistics on Income and Living Conditions to estimate the effects of robot penetration on wages and employment rates. Next, these estimates were used to calculate wages and employment rates that would have been recorded in 2018 if robot penetration remained at the 2006 level in each country. Finally, the resulting data was injected into EUROMOD, a tax-benefit microsimulation model, to assess the anticipated effects on household incomes.

 

The automation-driven increase in household income inequality was most pronounced in Eastern European countries that witnessed increases in robot penetration, such as Slovakia and Hungary. However, the magnitude was small – in all countries studied, it was below 1.5% of the 2018 value of the Gini index, much lower than the actual changes in Gini indices in most countries between 2006-2018.

 

Automation had a minor impact on household income inequality despite widening wage inequality and market income inequality to a larger extent. “In most countries, workers more exposed to robots tend to live with other household members with similar exposure. This pattern slightly amplified the automation shock at the household level, but the size of this effect was tiny, especially compared to the role of benefits,” the researchers wrote. They found that in general, benefit systems played a dominant role in cushioning market income losses, while taxes had a more muted role.

 

Past studies into the drivers of income inequality have focused on the role of tax-benefit systems and demographic change, but this is the first evaluation to isolate the effect of automation, the authors said.

 

There are some limitations to the findings. First, the simulations did not consider behavioural responses to automation. Second, changes in non-labour market incomes, fertility, or household structures were not included in the calculation.

 

Still, the findings paint a less gloomy picture of robots’ role in Europe’s economic development, the author said.

 

“Automation will affect the future of work, but robots explain only a minor share of changes in household income inequality in the countries that we studied,” said Piotr Lewandowski, a head of the Institute for Structural Research and co-author of the paper. “Tax-benefit systems were, and will continue to be, essential to mitigating the effects of automation shocks,” Lewandowski added.

 

Doorley, K., Gromadzki, J., Lewandowski, P., Tuda, D., and Van Kerm, P. (2023). Automation and Income Inequality in Europe (Deliverable 3.5). Leuven: UNTANGLED project 1001004776–H2020.

 

The paper is available here.

 

In his presentation, “Development of AI: Productivity and Distributive Effects in Europe,” Francesco Venturini shared the results of his work with Fabrizio Pompei, demonstrating that the productivity of firms developing AI is 13.7% higher than of those who are not innovating in this field. The generation of AI technologies also helps laggard firms catch up with the productivity leaders.

 

AI development also has a significant impact on the share of labour in regional income (gross value added, GVA). Researchers found that AI reduces labour share and widens regional income disparities. While the share of regional income for highly skilled labour remains unaffected, that of medium-skilled workers decreases by 3%, and that of low-skilled workers decreases by 9 % with the doubling of AI-related innovation. Therefore, AI seems to contribute to an uneven distribution of wage income.

 

You can access Francesco Venturini’s presentation here.

 

For a deeper dive into UNTANGLED research on AI, read Fabrizio Pompei and Francesco Venturini’s paper by clicking here.

 

Date: 19 October, 2023

Time: 2:00-3:45 pm CEST

 

This online event, titled “Harnessing the Benefits of AI, Industry 5.0, and Other Digital Innovations – More Opportunities but Also More Challenges for Social Innovations?” is organised by the European School of Social Innovation (ESSI) and will be chaired by Antonius Schröder (TU Dortmund University).

 

Don’t miss out! Register by 13 October here 

For more details and the programme, please visit ESSI website