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Impact of the Digital Revolution on the Labor Market


Brand-new technologies have become a critical element of the labor market and its working operations. They make it feasible for organizations to automatize the production process so as to increase the level of output and overall performance. However, with the introduction of machines, manual and routine tasks previously operated by humans are being replaced. Devices possess an undeniable set of advantages regarding reduction in the cost of manufacture and cut on idle time. Therefore, the labor market, quantity of employed or seeking employment people of working age, bear the costs of an increased rate of automation. In this essay, the impact of machine exploitation on the workforce and its activities will be examined.

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The Fourth Industrial Revolution

The Fourth Industrial Revolution or Industry 4.0 is the transformation to fully automated electronic production. Constant engagement with the external environment is another aspect of the digital changes with the prospect of merging into a global industrial network of Things and Services. The development of the Internet, Information and Communication Technologies (ICT), stable channels of communication, cloud technologies, and online platforms, as well as the informational explosion of various data, ensured the emergence of open information systems and global industrial networks, crossing the line of an individual enterprise. Such opportunities are transforming all sectors of the modern economy and business outside the ICT sector and moving automation to the new fourth stage of industrialization. Nevertheless, it is their integration of them into one whole structure, which will allow to development of the concept of Industry 4.0 and provide a new level of production efficiency and additional income through the use of digital technologies. Thus, Industry 4.0 is comprised of different components, altering the manufacturing procedures in new directions.

The Skill Factor

Automation leads to a growing distance between factory owners and workers, whose wages will be reduced due to lower production costs. Technological development can destroy a range of professions, increase unemployment and deepen discrepancies between male and female roles. Only careers requiring creative and social skills based on human qualities such as mercy and compassion will not be at risk of automation. The emerging production sphere will be characterized by a narrow specialization of labor. It will be based on specific projects and assignments for potential applicants in the virtual cloud, which will inevitably lead to fragmentation and isolation of working life. According to Pula (2017, p. 1), the dual labor market theory implies that companies consider workers on the ground of their “individual skills and capacities.” Therefore, there will be market segmentation, dividing people into skilled and unskilled, creative and uncreative, exceptional and unexceptional. The new technological reality imposes stringent requirements on professionals and draws the image of a successful person. Hence, a list of specialist demands will increase, forcing people to raise the bar of aptitude even higher.

Workers’ efficiency and success will depend on critical thinking and the ability to adapt to changes. Taking the healthcare industry as an example, understanding and controlling technology will act as the basis for ordinary medical staff. Passive users of the technology will find themselves in a less advantageous situation, which will inevitably increase inequality among people as well as the disproportion of skills required for a job application. Park (2016, p. 2) suggests that “demand” for skilled workers will skyrocket as the world enters the next digital revolution. Proficiency in “nanotechnology, 3-D printing, genetics, and biotechnology” will become a vital aspect of healthcare workers’ jobs (Park, 2016, p. 2). A rise in demand will lead to an incremental trend in wages and, thus, higher economic growth. On the other hand, it can be expected that a variety of jobs that do not require particular expertise will suffer a fall in demand and a further decline in salaries. For instance, a medical school graduate with a specialization in big data analysis is likely to be highly demanded by potential pharmaceutical firms. In contrast, construction workers will find it difficult to adjust as their tasks might be substituted by automated equipment with minimal human intervention.

The activities threatened by the industrial revolution have one thing in common: artificial intelligence has the skills to perform via algorithms more efficiently and accurately. Adams (2018, p. 352) states that perfunctory tasks involve a “sequence of instructions”, which can be repeated by machines. Considering the assumption of the perfect labor market theory, it can be noted that there will be less freedom of entry since expertise and individuality are significant barriers for potential applicants (Sloman, 2019). Therefore, the key to efficient adaptation is to develop the necessary skills. Scientific and critical thinking, the ability to synthesize information, and empathy become more valuable than the baggage of knowledge. Companies will deal with issues of uninventive staff as they need to encourage intellectual workers to “release their human potential” (Xu, David, and Kim, 2018, p. 91). The demand curve for unique employees will accelerate or shift to the right, while unskilled and monotonous jobs will undergo an opposite trend. Thereupon, apart from professional mastery, workers will face creative obstacles.

Developing further a skill-based evaluation of the effect of new technologies on the labor market, it is worth discussing the level of competency workers possess. According to Goos (2018, p. 364), during the last decades, the role of education and training has increased dramatically. From the bar graph, it is evident that the share of college graduates had raised to approximately 30% in 2000 (Goos, 2018, p. 364). Compared to the year 1940, the fraction was below 7 percent, thus, experiencing more than a threefold boost. At the same time, people started enrolling in colleges at higher rates. By the beginning of the twenty-first century, the proportion of those without a college degree fell almost eight times. Hence, the abovementioned statistical data implies a similar impact to previous industrial revolutions. Preparing for the future, the forthcoming workforce was flexible and adaptable to changes. The labor market forces will adjust so that employees will function in balance with machines, finding new ways and methods to sustain employment. Accordingly, the historical background of the preceding modifications needs to be contemplated.

Educational Trends

The Horizontal Career Growth

Artificial intelligence has been effective in displacing labor engaged in intellectual routine. Professions that had not previously anticipated deep knowledge of technology are now compelled to do so. The marketer must understand how browser algorithms work, while the financier is obliged to understand Information Technology because problems are connected with high-tech solutions. Even pizza delivery service operators will soon have to figure out how drones work and how to operate them. Hence, the business task now is to retrain the staff. Thus, organizations will bear alternative costs of educating their employees; otherwise, it will be difficult to find an available specialist on the market. The next trend in the 4.0 revolution is the development of a horizontal career. A technologist, for example, in addition to specific professional requirements such as the design of composites and how they are produced, needs to be able to work with documentation and know English in order to read relevant literature and keep pace with global developments. Thus, workers will grow in different directions, regardless of their specific niche or college degree.

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Working outside of the Office

Homogeneous labor refers to the identical productivity levels of workers in perfect market conditions. This conjecture falls under question when it comes to digital transformation since it directly relates to the active use and development of technologies. Businesses will reconsider and reevaluate the performance statuses of their employees so as not to lose an opportunity for cost reduction. Moreover, with the rise of creativity, people will have more control and flexibility over their salaries and leisure time. To be more precise, freelance is the promising future of the labor market. The abandonment of eight-hour jobs and transition to the supple schedule are luring opportunities for the current workforce. Such a shift will inevitably affect other industries akin to transportation, telecommunication, and insurance. Thereby, efficiency will be a vital factor to consider during the hiring process, whereas self-employment is an attractive possibility for freedom-loving individuals.

The current health crisis is indisputable proof that technologies allow employment remotely. Rent bills for office spaces account for a considerable share of the overall expenses. On the other hand, working from home can be considered by companies as a way to cut costs. Freedom of timetable, absence of dress codes, and comfortable environment may positively influence their productivity and increase output level. Additionally, firms might be in favor of contractive workers. Thus, demand for them will increase and idle time will reduce. There will be a rise in wages, leading to a climb in aggregate demand and economic growth (Sloman, 2019). Over and above costs fall, people will be more motivated to work and create, operating more effectively and satisfactorily. Working outside the office building can enable global recruitment of the workforce, removing country borders. What is more, it might facilitate loyalty, devotion, and commitment on the part of the employees. Thus, distant working has a positive impact on the labor market by raising demand for a lower-cost workforce.

In conclusion, it can be drawn that the fourth industrial revolution has an unquestionable impact on the labor market by exploiting state-of-the-art technologies instead of human beings in the production process. In other words, automation leads to a reduction in labor costs, which increases the profits and revenues of the companies. Moreover, with digital changes, the concept of efficiency will be redefined as creativity and individuality will play a crucial role in the working operations. This could be for the reason that routine tasks, requiring blind following to the instructions, can be easily replaced by machines, performing without deviations and mistakes. Additionally, in order to assess the effect of the current industrialization, the history of previous ones might be revisited. Furthermore, directions of career growth will change where workers will be expected to comprehend basic gadget skills. The perfect labor market theory assists in the evaluation of the consequences, contributing to the subsequent understanding of the changing patterns.

Reference List

Adams, A. (2018) ‘Technology and the labour market: the assessment’, Oxford Review of Economic Policy, 34(3), pp. 349-361.

Goos, M. (2018) ‘The impact of technological progress on labour markets: policy challenges’, Oxford Review of Economic Policy, 34(3), pp. 362-375.

Park, H. (2016) ‘Are we ready for the fourth industrial revolution?’, Yearbook of Medical Informatics, (1), pp. 1-3.

Pula, B. (2017) ‘Dual labor market theory/dual economy’, The Wiley‐Blackwell Encyclopedia of Social Theory, pp. 1-2.

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Sloman, J. (2019) Economics for business. 8th edn. Harlow: Pearson.

Xu, M., David, J. M., and Kim, S. H. (2018) ‘The fourth industrial revolution: opportunities and challenges’, International Journal of Financial Research, 9(2), pp. 90-95.

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